Let’s mBridge the gap: India mustn’t stand aloof as new digital payment mechanisms emerge

At the heart of this evolving dynamic lies mBridge, an initiative incubated under the Bank for International Settlements (BIS) for interoperability among multiple central bank digital currencies (CBDCs). The BIS left the project in 2024.

What began as a technical exploration has acquired unmistakable strategic overtones. Unlike existing systems such as Swift, which facilitate communication between banks, mBridge is designed to enable integrated settlements of dues.

Built on distributed ledger technology, it lets participant central banks transact directly with one another in real time—with finality and without recourse to the layered correspondent banking chains that are typically anchored in dollar clearing.

This distinction reflects the changing nature of monetary power. The prevailing dollar-centric global system has historically provided efficiency, liquidity and scale. Yet it has also demonstrated that access to its clearing mechanisms is neither automatic nor unconditional. Recent years have shown how financial infrastructure can be used as a policy instrument to impose sanctions, freeze foreign-exchange reserves and exclude some actors.

It is against this backdrop that initiatives such as mBridge must be understood. They represent an effort to introduce optionality—both in the currencies used for trade and in the systems through which payments are settled. For countries engaged in critical flows such as energy, this optionality is becoming increasingly valuable as a form of insulation from geopolitical disruptions.

As the world’s largest importer of crude oil, China has sought to expand the yuan’s use in energy trade, giving rise to the notion of a ‘petroyuan.’ However, the more consequential development lies not in currency denomination alone, but in support systems. Without credible, scalable settlement mechanisms, shifts in invoicing currency remain constrained.

Unsurprisingly, such developments have elicited concern, particularly in the US. The prospect of settlement systems evolving outside the ambit of dollar-clearing raises questions about the future reach of financial sanctions and, more broadly, about the distribution of monetary influence. Financial infrastructure has long been an extension of geopolitical power, and as it diversifies, the contours of that power may change.

At present, India is not part of the core group shaping mBridge. The country has understandably approached such initiatives with caution, particularly where strategic dependencies may arise. Financial systems, once embedded, are not easily reconfigured and prudence in their adoption is both necessary and justified. However, the architecture of global payments may be headed for a phase of flux. Standards are being defined, governance frameworks being debated and operational norms being established.

India’s record offers a strong foundation for such engagement. Its digital public infrastructure has demonstrated that scale, efficiency and resilience can be achieved simultaneously. The evolution of its domestic payment systems, alongside ongoing work on a sovereign CBDC, reflects both technological capability and regulatory maturity. Extending this experience into the global domain would let India contribute constructively to the shaping of new financial networks.

There is also a pragmatic dimension to this. Recent efforts to operationalize alternative trade arrangements, such as the rupee-rouble mechanism, encountered frictions that underscore the importance of robust settlement infrastructure. Without credible and widely accepted mechanisms, bilateral frameworks remain vulnerable to external pressures and operational imbalances. A more diversified and resilient settlement architecture would mitigate such risks.

As India’s global footprint expands—from energy procurement and tech partnerships to development finance and defence trade—its economic interests are becoming more widely dispersed than the financial systems that support them. A growing share of our future engagements will lie in jurisdictions that are politically sensitive, sanctions-exposed or simply outside the comfort zone of Western financial networks.

Not just trade, but capital markets could benefit too. Seamless cross-border settlement in rupees could enhance the attractiveness of Indian financial assets by reducing both currency risk and settlement friction—two variables that global investors price in. As frictions decline, participation in India’s market for government bonds can deepen. And as outbound capital flows grow, they will require payment systems that operate with speed, confidentiality and legal certainty across regimes.

In a fragmented world, control over payment rails is no longer merely a technical or financial choice—it is fast becoming the new grammar of sovereignty.

The authors are, respectively, a corporate advisor and author of ‘Family and Dhanda’; and a strategic security and digital policy researcher.