Ripple Releases White Paper Reaffirming Its Belief in CBDCs

Blockchain-based payment solutions provider Ripple has reaffirmed its support for central bank digital currencies (CBDC). In a 23-page white paper released on December 14, the firm explains the basics of CBDCs, their potential benefits, risks, and barriers to mainstream adoption. It also stresses the need for governments and private sector players to collaborate in addressing challenges.

Citing a report by global management consulting firm McKinsey, Ripple presents CBDCs as an aid to ensuring financial inclusion, reducing fraud and money laundering, stimulating payment innovation, and reinforcing monetary policy control.

The document also highlights the role of central bank digital currencies in tokenization, stating:

“CBDCs are needed to support the most significant positive impacts of asset tokenization, an increasingly targeted mechanism for transforming tangible assets into digital tokens stored on the blockchain. With tokenization, anyone can view the process of asset transfer through ownership,” the paper reads in part, adding that “tokenization improves privacy and agility as assets move peer-to-peer without the need for centralized intermediaries within decentralized networks.”

The whitepaper goes on to mention some barriers to widespread CBDC adoption including lack of end-user adoption, little-to-no consumer education, fears about privacy and security protections, digital identity verification, lack of interoperability among CBDCs and offline access to transactions. The firm reasons that these issues are not “unsolvable,” adding that they must be solved at scale and often through collaborative efforts among countries and jurisdictions.

Ripple is currently working with over 20 central banks from around the world, helping them to develop digital versions of their national currency. These include The Royal Monetary Authority (RMA) of Bhutan, Colombia’s Banco de la República, and the Central Bank of Montenegro.

Columbia’s Minister of Information and Communication Technologies Mauricio Lizcano comments:

“Potential efficiencies can be evaluated through the results obtained in the development of a solution with blockchain technology. In turn, this manages to improve and complement the processes in the entities in a safe and efficient way. In addition, it will provide a technological solution. This solution will allow simulations of different use cases in the high-value payment system.”

The paper concludes by re-emphasizing the need for cross-government collaboration. It notes although central banks are moving at different paces in CBDC development, they are “extraordinarily interdependent”. It adds that the global adoption of sovereign-backed digital assets will need agreement on common standards and protocols that will enable interoperability.

It is estimated that $5 trillion worth of CBDCs from around the globe will circulate through major economies over the next 10 years – further incentive for governments and private sector participants to work together towards addressing challenges.

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