Ripple has published a paper explaining how central bank digital currencies or CBDCs can help create more efficient and reliable financial systems.
The document, titled "CBDCs: The Digital Evolution of Money", talks about the advantages, risks, opportunities and challenges that CBDCs pose for financial transformation and evolution.
These digital currencies, issued by central banks on a blockchain, can significantly improve payments innovation, foster financial inclusion and reduce the risk of money laundering and other financial crimes. However, according to Ripple, education about the benefits and adoption of CBDCs by end users is still low, which has led to some concerns and fears about privacy.
In the document, Ripple highlights that CBDCs “have the potential to help digitize entire economies and represent a powerful force in unlocking the Internet of Value.”
Currently, some 130 countries around the world are exploring the development and issuance of a CBDC. All of these countries have been progressing at their own pace in adopting this new form of digital money, with Bahamas, Nigeria and China being the most advanced countries so far, in terms of a CBDC.
Ripple is a company that offers innovative payment solutions based on blockchain technology, and has been collaborating with at least 20 countries to accelerate their initiatives to create their own digital currencies. Among them, Georgia, Palau and BRICS.
85% of financial leaders believe their country will launch a CBDC
The 23-page document recently published by Ripple also explores the advancement of CBDCs from the point of view of end users.
According to the blockchain company, 85% of global financial leaders surveyed for the report believe their country will launch a digital currency in the next 4 years. According to Ripple, the majority of these financial leaders find advantages in issuing a CBDC, the main ones being financial inclusion, improvements to national competitiveness, greater efficiency in payment systems and the boost to innovation in general. .
CBDCs provide a degree of transparency and privacy that is not possible with traditional technologies used in the current financial system, Ripple said. This considering that central bank digital currencies allow “assets to move peer-to-peer without the need for centralized intermediaries in decentralized networks.”
The role of CBDCs in tokenization
Governments, also driving the development of CBDCs, are increasingly recognizing the positive implications of digital currencies and tokenization to improve conventional asset ownership and investment models.
Ripple maintains that asset tokenization has become an increasingly targeted and in-demand mechanism for converting tangible real-world assets into digital tokens stored on the blockchain. “With tokenization, anyone can follow the process of transferring assets through ownership,” the company noted. This innovation of blockchain technology improves privacy and agility, enabling a wide range of uses for digital assets that go beyond the exchange of value.
Security and interoperability, among the risks
On the other hand, there are those who identified that the design and development of CBDCs entails certain risks, mainly related to the security of the assets and the interoperability of digital currencies.
Regarding the challenges in the adoption of CBDCs, Ripple pointed out the need to promote global cooperation between the world's governments, in order to establish universal and common standards and protocols that facilitate the interoperability of CBDCs.
The blockchain company estimates that digital currencies issued by central banks will become a reality in many economies around the world in the next decade, reaching a value of about $5 trillion. This trend represents an opportunity and a challenge for public and private actors, who must collaborate to guarantee the security, efficiency and financial inclusion of this new generation of money.
Continue reading: Georgia chooses Ripple as a technology partner to develop its CBDC
