mBridge members China, Thailand sign local currency agreement as they look to improve cross-border trade

mBridge members China and Thailand have taken a significant step in enhancing their bilateral relationship by signing a local currency agreement aimed at improving cross-border trade between the two nations. The agreement, known as the “Cooperation Framework for Bilateral Local Currency Transactions,” was formalized through a memorandum of understanding (MoU) signed by the central banks of both countries. Under this framework, trade between China and Thailand can be conducted using either the Chinese yuan or the Thai baht, reducing dependence on the U.S. dollar. The agreement also enables businesses to access local currency financing, minimizing exposure to foreign exchange risks. In addition, the use of central bank digital currencies (CBDC) for settlements is being considered, with the establishment of a joint CBDC project called mCDBC involving Hong Kong and the United Arab Emirates. While mBridge will play a central role in implementing the local currency agreement, commercial rollout challenges lie ahead. However, the platform aims to launch a minimum viable product (MVP) by the second quarter of 2024, with more central banks expected to join the initiative. Despite the interest and potential benefits of CBDCs, geopolitical issues may pose obstacles to an early rollout. China has made significant progress with its digital yuan, while Thailand is taking a cautious approach to ensure a balanced financial ecosystem.