- Ripple global remittance company and the non-profit Digital Pound Foundation have partnered to create and launch UK’s CBDC – the digital pound.
- Despite 80 percent of central banks worldwide wanting in on CBDCs, the potential cons of these currencies still lurk.
Ripple has taken another step in collaborating with central banks for the development of central bank digital currencies (CBDCs). The cross-border payments company now joins the Digital Pound Foundation to provide its technical and policy-making expertise regarding CBDCs. Launched today, the Foundation is a non-profit organization promoting the creation and implementation of the United Kingdom digital pound.
According to Ripple, the UK has long been spearheading the development of “responsible innovation and growth in the crypto-asset space.” The digital Pound is one of the results of the nation’s efforts. A CBDC’s existence would advance the nation’s transition to an innovative digital economy and society. The CBDC will also, in addition to other digital currencies, secure the UK’s position in the evolving digital landscape. Susan Friedman, Ripple’s Head of Policy, and now part of the Foundation’s board noted;
The Foundation will help advance the UK’s goal to build a more inclusive and sustainable financial system,
Ripple and the digital Pound Foundation join forces
Notably, the Foundation will conduct research, advocacy, and multi-stakeholder collaboration. All these efforts are geared towards the design and eventual launch of the digital pound, a Thursday press release read.
At the moment, over 80 percent of central banks worldwide, now including the Bank of England, are exploring some form of sovereign-backed cryptocurrency. For this reason, Ripple launched a CBDC solution that enables efficient, fast, cheap, and more sustainable payment infrastructures.
Despite being in an almost-year-long legal tussle with the US Securities and Exchange Commission (SEC), the remittance company continues spreading its roots in payments infrastructures. Last month, Bhutan’s central bank, the Royal Monetary Authority (RMA) partnered with Ripple for its CBDC solution. Ripple is also collaborating with Qatar National Bank and UK-based Paydek to expand remittances using RippleNet.
Research from Finextra shows the potential benefits for countries or individuals embracing CBDC’s. Other than their speed and efficiency, these digital currencies would address the decline in the use of physical cash. They would also challenge the threat that cryptocurrencies and other digital coins, like Facebook’s Libra, pose on central banks.
However, the downsides include heightened competition between central banks and commercial banks, also referred to as the “disintermediation” of commercial banks. Each would try to get higher consumer attention by posting better deposit, interest, and lending products. Central banks would also impose on themselves operational burdens such as know-your-customer (KYC) and anti-money laundering (AML) policies. Currently, these are responsibilities held by commercial banks. Additionally, users may feel the lack of financial privacy as central banks oversee their every financial move using CBDCs.
That said, CBDCs, just like cryptocurrencies and blockchain technology are relatively nascent technological developments. Time will, therefore, determine their full benefits and ramifications to financial systems and the community.