Despite the lingering court case against Ripple and its native token XRP, the distributed ledger technology (DLT) payment company has launched a new platform for developing central bank digital currencies (CBDCs) and stablecoins.
Ripple announced on 18 May it is launching a full service platform that will be used to easily mint, manage, transact and redeem CBDCs and stablecoins. The frictionless end-to-end solution will allow central banks, governments, and financial institutions to issue their own central bank digital currency.
The platform makes digitization of the fiat currencies of countries easy, and is a way to bring about inclusiveness in countries and areas where there are many unbanked. While the new platform is built on a separate blockchain, it is powered by Ripple’s fast and seamless payment system.
Central banks, monetary authorities or commercial banks issuing a CBDC will be able to manage the full life cycle of their fiat based digital currency every step of the way, from minting and distribution all the way to redemption and destruction.
End users can also own wallets that enable them to pay for and receive payments for goods and services, just like any existing payment system, including for offline transactions. Even people without smartphones will be able to use such CBDCs.
A Response to the Growing Need for CBDCs
There is a recent rising interest in CBDCs from governments all over the world. China was one of the first to start pursuing a digital form of their currency, the Chinese Yuan. The country is now in advanced stages of testing the CBDC and could be doing an official launch soon.
Other countries like Russia are just starting out, but the trend shows that there will be an increasing demand for CBDCs. While governments say they pursue CBDCs for inclusivity in financial transactions, another leading motivation is to curb the use of cryptocurrencies.
Ripple has seen this potential and is positioning itself as the go-to platform for governments seeking this solution, and has already started working with clients. The company has already assisted the Republic of Palau to create a CBDC. According to the country’s president Surangel Whipps Jr,
“Partnering with Ripple to help create our national digital currency is part of our commitment to lead in financial innovation and technologies, which will provide the citizens of Palau with greater financial access.”
Recent news also reveals that Ripple is working with the Hong Kong government to create a CBDC. Hong Kong Monetary Authority announced that the pilot project will explore the potential use cases of the digital Hong Kong dollar (HKD) using a select group of firms from the financial, payment and technology sectors.
Responding to questions in a Q&A session, Ripple vice president of central bank engagements and CBDCs James Wallis said “Experiences coming out of the Rail 2 pilots will factor into any decisions by HKMA to go live with an e-HKD at a later date (Rail 3).”
The Case Against CBDCs
CBDCs are digital currencies, just like Bitcoin and other decentralized crypto assets. While the possess the attributes of transaction transparencies that are inherent in Bitcoin for example, they possess central control, unlike Bitcoin.
This empowers an entity such as the central bank of a country to directly monitor transactions and can decide who spends how much and on what. CBDCs take financial privacy and power from the people and puts it in the hands of the government, and this has been protested in many quarters.
This is why some crypto fans may be disappointed at Ripple – a leader in the crypto space – for subscribing to facilitating the creation of CBDCs which directly work against everything that crypto represents.
Such a move by the largest cryptocurrency exchange in the world, Binance was severely criticized in thepast, and this may not be an exception. By empowering governments to create CBDCs, Ripple could be helping to facilitate a totalitarian regime in the world, where financial freedom could be lost forever.