According to the IMF, more than 110 central banks have stepped toward CBDC development. At the same time, Ripple Labs Inc, a blockchain payment company, has released a report stating that around 90% of central banks today are actively involved in creating their own digital currency.

It is important to note that CBDCs are not entirely new; surprisingly, they have been around for almost three years. In 2020, China spearheaded the idea of CBDC by running a broad-based retail test of the Chinese digital Yuan. The report titled, The Future of Fiat, Ripple gave several reasons why it believes that many central banks embrace CBDCs. One of the main reasons highlighted by the firm was increased payment efficiency.

Today, digital payment methods rapidly take over outdated cash payment, especially in developed nations. The arrival of blockchain technology exposed shortcomings of digital payment methods, such as high transaction costs and slow speed. Normally, an overseas transaction using a digital payment would take days to complete and, even worse, using cash payments.

However, with the help of blockchain technology, these transactions take seconds or minutes at most to complete. With such a massive plus, it has been hard for users to reject blockchain technology and thus threaten the legal tender in many nations. CBDCs can improve the overall payment landscape of a country, especially considering the recent advancements that have been made globally.

Ripple has reported that the introduction of CBDCs will improve national competitiveness. In addition, the firm believes CBDCs will help financial institutions revamp their roles and gain more trust from citizens.

Ripple and CBDCs: How?

Over the years, Ripple has grown to become one of the most dominant blockchain payment ecosystems in the market today. Throughout its lifetime, the firm has developed a simple and entertaining solution based on the XRPLedger. Central banks can use this ledger to deploy their own CBDCs. Ripple claims its CBDC hosting platform will offer stability, resilience, and security. The firm adds that central banks can use its XRP-proven ledger to build trust. This will ensure consistent top performance and enforce privacy and security. Moreover, Ripple announced that the XRPLedger would enable CBDCs to create wholesale products which the bank can use, the public, and fintech.

The other significant benefit to central banks that will adopt the XRPLedger is interoperability and overlay services. The CBDC development will also be sustainable as it will be based on Ripple’s energy-efficient protocol. After highlighting that it can support CBDC and stablecoin development efficiently, Ripple mentioned the strategic plan it has with Bhutan in creating the digital Ngultrum. Currently, Ripple competes with firms such as Visa and Mastercard, where both actively search for solutions to help central banks in CBDC development.

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Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.