Wholesale CBDC: How the Plumbing of Big Money Is Changing

The part of finance nobody films

When people talk about CBDCs, the conversation usually lands on you and me: a digital wallet, a coffee bought with central bank money, perhaps a small existential crisis about cash disappearing. But the more consequential story is happening one floor down, in the wholesale market — the place where banks move very large sums to each other.

A few definitions first. A central bank digital currency, or CBDC, is an electronic form of a central bank's own money. "Wholesale" narrows the audience: a wholesale CBDC (wCBDC) is central bank money in digital form that only eligible institutions, such as banks, can access. It's not something you'd tap at a shop. It's the stuff of interbank clearing and settlement.

To understand why that matters, you need two words that sound dull and are secretly the whole ballgame: settlement asset and platform. The settlement asset is the "what" — the actual money used to discharge an obligation. The platform is the "how" — the rails carrying the instruction. Today, at the US Federal Reserve, the what is reserves: digital balances that banks hold in master accounts. The how is Fedwire, a real-time gross settlement system where payments go through one by one with immediate finality.

What mBridge actually built

Now imagine stitching several countries' systems into one shared technical fabric. That is roughly what Project mBridge did.

Starting in 2021, the BIS Innovation Hub worked with the Bank of Thailand, the Central Bank of the UAE, the Digital Currency Institute of the People's Bank of China and the Hong Kong Monetary Authority. The Saudi Central Bank joined in 2024. Their target was the well-known misery of cross-border payments: high cost, low speed, operational tangles and a retreat in some places of correspondent banking — the network of relationships that connects countries to the global financial system.

The team built a new blockchain, the mBridge Ledger, to support real-time, peer-to-peer cross-border payments and foreign exchange transactions. A pilot with real-value transactions ran in 2022. By mid-2024 the project reached the minimum viable product stage, meaning it could handle real-value transactions, subject to each jurisdiction's own readiness. Each founding participant central bank deployed a validating node. A rulebook and governance framework were drafted to match the platform's decentralised design. In October 2024 the BIS handed the project over to the partners.

The list of observers reads like a United Nations roll call for money: the European Central Bank, the IMF, the World Bank, the Federal Reserve Bank of New York's innovation centre, and central banks from Brazil to Korea to Namibia, among many others. Observing is not joining. It signals interest, not commitment.

The New York experiment, and why it's a useful reality check

Meanwhile, the NYIC — the New York Innovation Center, launched in 2021 inside the New York Fed in partnership with the BIS Innovation Hub — ran a proof of concept with a group of large US banks, including BNY Mellon, Citi, HSBC, PNC Bank, TD Bank, Truist, U.S. Bank and Wells Fargo, with Mastercard, Swift, and legal and advisory support from Sullivan & Cromwell and Deloitte.

They tested a "regulated liability network": a shared ledger where simulated US dollar liabilities were tokenised — commercial bank deposits and a theoretical wholesale CBDC — then exchanged and settled.

Two scenarios were simulated. One covered domestic interbank payments between commercial banks, settled using a tokenised record of a central bank liability. The other covered cross-border payments in US dollars to counterparties outside the US. Both worked in the test environment, using only simulated data. The business workstream concluded the design could synchronise dollar payments and settle near-real time, around the clock, every day. The legal workstream found that recording and updating ownership of central bank and commercial bank deposits on a shared ledger should not change the legal treatment of those deposits — while noting that further analysis and regulatory engagement would be needed before final conclusions. That caveat deserves to be read twice.

The awkward question: do we even need a new kind of money?

Here's where the story gets refreshingly contrarian. A 2023 Federal Reserve note by Jon Durfee, Jesse Leigh Maniff and Priyanka Slattery asked whether a new settlement asset — new central bank money — is essential for a new tokenised wholesale platform.

Their answer: no.

The authors separate the "what" from the "how" using a simple grid. Keep existing reserves, keep Fedwire: that's the status quo. Keep reserves, move to a new tokenised platform: you get reserves on a new rail — new technology, same money. Only when you add a genuinely new central bank liability do you enter wCBDC territory as they define it. And crucially, a new liability without a new platform doesn't deliver the tokenisation, programmability and composability benefits people associate with wCBDC.

Three findings stand out. First, the technology isn't the obstacle: reserves should be usable on a tokenised platform, since account language of debits and credits is not inherently incompatible with tokenisation, and the existing balance sheet line item for depository institution balances could, on their reading, accommodate it. Second, new technology brings new risks — smart contract errors, more bilateral credit arrangements, added liquidity risk — but those risks don't by themselves require a new form of money; they require risk management, and who holds the authority to apply it matters more than the ledger's design. Third, arrangements matter: if a private entity operates the platform, connectivity between central bank accounting and that platform doesn't currently exist in the United States, though Switzerland allows central bank money on a private platform via legal agreements.

The authors also flag a scenario worth watching. If a central bank runs a tokenised platform and lets institutions build on top of it, programmability might lower barriers to lending and escrow-like arrangements, potentially creating credit and liquidity risk that spills over into existing payment services. In that case, some central banks might consider a separate form of central bank money — though they stress it is far from the only option.

Where FX clearing and broker liquidity come in

Foreign exchange sits at the centre of all this. Every cross-border payment eventually needs a currency conversion, and FX transactions are precisely what the mBridge Ledger was built to support peer-to-peer in real time — alongside the payments themselves.

That matters for two reasons. First, settlement timing. When payments and the currency conversion settle separately, participants carry intraday exposure. A shared platform with final settlement can compress that window, which changes how much liquidity a participant needs to hold ready. Second, liquidity pools. If a platform lets institutions in different jurisdictions transact directly, the operational balances they keep parked in correspondent accounts — and the buffers brokers maintain to fund and settle trades — face different economics.

Be careful with cause and effect here. These are possibilities suggested by the designs being tested, not measured outcomes. The NYIC business workstream found potential for near-real-time, round-the-clock settlement. mBridge was built for cross-border payments and FX and reached MVP. Neither tells us how much liquidity behaviour would actually shift, or by when.

What to watch, and what to keep in perspective

The retail side of CBDC is moving on its own timeline. The ECB describes the digital euro as a digital form of cash that would complement banknotes, is currently in its preparation and technical work, with a pilot planned for the second half of 2027 running twelve months and a target of readiness for potential first issuance during 2029, assuming the necessary regulation is adopted by the end of 2026. Notably, the digital euro would run on a centralised settlement platform, not distributed ledger technology, though it borrows DLT design principles.

Wholesale is different in kind. It is less about how you pay for groceries and more about whether the plumbing under bank-to-bank transfers gets rebuilt. Three things are genuinely uncertain. Whether jurisdictions proceed, since mBridge passed to its partners and readiness is jurisdiction-specific. Whether a new central bank liability is needed at all, where researchers have argued it is not essential. And how risk is managed, which the Fed note frames as a question of risk appetite for private-sector use of central bank money rather than a purely technical choice.

One more thing worth saying plainly: scammers have used CBDC excitement as bait. The ECB states it never asks people for investments, money or personal information.

The quiet revolution, if it comes, won't look like an app. It will look like a rulebook, a governance framework and a validating node — and a lot of people in suits asking who holds the keys. Which is, when you think about it, the oldest question in finance wearing new clothes.