International financiers pulled the plug on a groundbreaking paytech system in the Middle East. This system, called mBridge, set out to revolutionize cross-border trade using digital currencies, bypassing traditional dollar-based methods. But recently, it got tangled up in Russia’s attempts to evade sanctions tied to the Ukraine conflict.
On August 31, the Bank for International Settlements (BIS), which represents central banks worldwide, announced its withdrawal from mBridge. They had spent four years developing it, aiming to facilitate direct, peer-to-peer currency swaps for international trade. The system had attracted interest from BRICS nations—Brazil, Russia, India, China, South Africa, Iran, Egypt, Ethiopia, and the UAE—which were also working on a similar framework to trade with Russia and Iran, away from sanctions.
Tensions flared further when the UAE, Iran, and Egypt lent support to BRICS initiatives after joining the expanded bloc. Saudi Arabia threw its weight behind these efforts too. Just months before the BIS announced its exit, it highlighted the success of a pilot project involving central banks from the UAE, Hong Kong, Thailand, and China.
BIS chief Augustin Carstens claimed their withdrawal wasn’t due to political pressure. He pointed out that all member central banks agreed that their technology shouldn’t facilitate sanction violations. He framed it as a “graduation” from mBridge, asserting it had been a success and no longer needed BIS support. Still, he noted that the system was far from mature and required years to fully develop.
BRICS nations, minus Russia and Iran, have asserted their plans to create systems similar to mBridge for sanction evasion or dollar de-dollarization. Currently, most global currency transactions depend on the dollar, which gives the U.S. considerable influence over international trade. This situation frustrates BRICS members with strong trade ties to Russia, as they feel it undermines their sovereignty.
Although BRICS held an annual summit recently, the joint declaration expressed support for financial reforms rather than a complete overhaul of the existing system, despite various claims to the contrary. They have set up several bilateral trading partnerships to operate without the dollar, but these systems are often inefficient and costly. Initiatives like mBridge and a potential BRICS payment system aim to address these shortcomings.
Finance ministers from BRICS and its new MENA members expressed interest in developing a cohesive payment system in another recent statement. The BIS had envisioned mBridge becoming a global platform for local currency exchanges, having already executed real trades among commercial banks in Asia and the Middle East. This past summer, they announced that mBridge reached a minimum viable product status.
Under a Brazil-led G20 initiative, mBridge represented an evolution of the global financial landscape, seeking to mitigate the challenges of modern cross-border payments. However, as calls for the U.S. to improve dollar-based systems grew, the G20 has shifted toward making more immediate, practical improvements rather than pursuing extensive new alternatives.
U.S. Treasury official Nicholas Tabor noted that with support from the Biden administration, the G20 recognized a need for targeted enhancements, focusing on harmonizing global regulations and improving interoperability among payment systems.
Political economy professor Robert Wade pointed out that BRICS’ approach to trade—especially with sanctioned states—makes it appealing to larger countries outside the West. He indicated that as long as the U.S. wields the dollar as a weapon, nations will prioritize developing alternative payment systems. However, he believes it could take a decade or more for these alternatives to significantly impact international trade and undermine U.S. influence.
Cal Evans from a digital finance consultancy remarked on the Gulf’s historical trading legacy, suggesting that countries like Saudi Arabia and the UAE are willing to engage with both G20 and BRICS. He underscored that the most significant outcome would be if BRICS successfully reduces reliance on the dollar.
On the ground, private companies in BRICS countries have already started cross-border trading with digital assets, an area where the U.S. isn’t as enthusiastic. Saudi Foreign Minister Prince Faisal bin Farhan emphasized stronger ties with BRICS during the group’s summit. However, official membership for Saudi Arabia remains pending amidst ongoing sanctions against UAE firms related to trade with Russia. The BIS and other involved officials have chosen not to comment further on these developments.
