Ripple hints towards XRP as the engine oil for global interoperability of central banks

With most governments worldwide exploring the use of Central Banks Digital Currency (CBDC), Ripple has released a report in order to provide Central Banks with a framework for implementing CBDC’s and ensuring global interoperability of their digital currencies. Ripple expects half of the world population to use digital wallets for transactions by 2024.

“In our globalized world, consumers and businesses will inevitably have a need to transact with foreign suppliers and vendors. CBDC’s that are interoperable with each other will give those countries a competitive advantage, much like how being part of a trading block benefits member nations,” The Future of CBDC’s report states.

While the current focus of CBDC seems to be on the domestic transactions, in order for CBDC’s to become successful, global interoperability is key and Ripple subtly hint to the role it sees for itself in this process:

“To enable a truly efficient global market, a bridge currency must be specifically optimized for payments and support the same speed, scalability, low cost and security that CBDCs will provide. One example of a neutral bridge is the digital asset XRP, which can be used to bridge two different currencies quickly and efficiently.”

It is this neutral bridge that, according to ripple, is needed to avoid the pitfalls that current cross-border transactions pose.

The report further highlights the need for cooperation between the public domain and private companies by building on the expertise of these private companies that have already successfully developed digital currencies. Outlining the importance of the ability of central banks to maintain control, it is noted that:

“A CBDC could be issued and managed using a private version of an existing decentralized ledger. While blockchain transactions are typically validated by many public validators, Central Banks could restrict this ability to a handful of trusted partners”.

“This would give Central Banks the flexibility and functionality that comes with decentralized ledgers, while retaining enough centralized control over their monetary policies and economic management.”