Visa and ConsenSys' new CBDC development platform will enable central banks to create simple, effective and innovative financial services for their customers.
View, the multinational financial services and ConsenSys, technology-based software provider blockchain, prepare a new development platform for CBDC: digital currencies issued by central banks, which will compete with digital economies based on cryptocurrencies, y stablecoins, which pose risks to global financial stability, according to regulators. In a release issued this Thursday, Visa reported that its strategic collaboration with ConsenSys will allow it to leverage the company's experience and technology to drive the development of a new infrastructure based on the Quorum protocol, which can help central banks and financial institutions around the world to create simple and effective services for your clients.
The new Visa and ConsenSys development platform was born with the vision of connecting traditional finance with the potential and innovation of blockchain. Through a CBDC network, central banks will be able to offer a more efficient and reliable experience, which guarantees the permanence of their business over time. The boom in cryptocurrencies and private stablecoins has put at risk, to some extent, the effectiveness of central banks and the traditional financial system in general; Therefore, banks are adopting new technologies in order to create new forms of digital fiat money that allow the construction of more efficient and attractive services.
Until now, some 110 central banks of the world have expressed their interest in the development of a CBDC. For its part, blockchain firm ConsenSys has already been collaborating with several governments, such as Australia, France, Hong Kong and Thailand, to help them develop their own CBDC digital currency.
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CBDC, financial accessibility
Catherine Gu, head of CBDC at Visa and Shailee Adinolfi, director of strategic sales at ConsenSys, revealed several of the advantages and utilities that CBDCs bring with them and that are motivating companies to develop a new digital infrastructure to drive this innovation.
First of all, the executives pointed out that CBDCs can contribute to the expansion of financial services, without problems and without demanding excessive resources. Specifically, Gu indicated that a central bank can efficiently send fast and secure payments to a wide group of citizens through a CBDC; something that would be extremely useful for cases such as the stimulus payment, “a task that requires immense resources and coordination” if it is done through the traditional financial system.
“Residents of a particular community facing economic hardship could receive immediate government assistance directly to their digital wallets.”
Likewise, Adinolfi emphasized that CBDCs will expand access to financial services to millions of people who are still unbanked or who live in remote places, but who have access to a mobile phone and the Internet.
Challenges of CBDCs
Although CBDCs bring great benefits, they also pose challenges for issuing central banks and their users. For example, one of the biggest concerns surrounding CBDCs and digital currencies in general is security. When issuing a digital currency, the responsible central bank must be able to ensure stability, security and resilience to its citizens, to emit confidence and tranquility.
On the other hand, central banks must provide tools and products that guarantee optimal service to their citizens and that support massive demand, in order to provide a fluid, intuitive and familiar experience at all times. Likewise, central banks must deal with the risks posed by the issuance of a CBDC for other participants in the traditional financial system, such as commercial banks and financial institutions, whose services and functions could benefit from the issuance of a new fiat digital money. straight.
Interoperability is another of the challenges that CBDCs represent for central banks and to which Visa and ConsenSys are seeking an effective solution.
The work of Visa and ConsenSys
To help central banks address the challenges of developing and issuing a CBDC and make the most of the potential of these digital currencies, the new platform developed by Visa and ConsenSys will focus on connecting digital currencies with financial infrastructure. existing. So businesses and retailers can easily accept CBDC payments everywhere from the start and traditional financial service providers can connect to CBDC networks seamlessly.
Also, for bank processors and issuers, companies are coming up with new functions, such as issuing payment cards linked to CBDCs or issuing digital wallet credentials, among others.
Visa cards for central bank digital currencies
Visa, which is the largest provider of credit, debit, prepaid and gift cards, noted that if CBDC networks fit seamlessly with the traditional financial system and existing banking applications, then it could link its Visa cards to CBDCs, to facilitate digital payments with these currencies in its network of 80 million businesses around the world.
In September 2021, Visa introduced an interoperable payment channel to facilitate the integration of digital currencies with cryptocurrencies. Likewise, in February of that year, it reported that it would integrate crypto assets such as Bitcoin, Ethereum and stablecoins into its payment network. Cryptocurrencies have become an important part of this financial services provider, as well as competitors such as Mastercard, motivated by the adoption and exponential growth that cryptocurrencies have had in recent years.
Cryptocurrencies and society
Society is transforming and the institutions of the traditional system must evolve and adapt to meet the new needs and demands of their users. In this context, CBDCs hold enormous potential for banks to create new innovative services. Visa and ConsenSys noted that despite the many use and application cases that exist for CBDCs today, there are still many more unexplored for these digital currencies.
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