Ripple Published Whitepaper on CBDCs Highlighting Their Potential

Table of Contents

• CBDCs Enable Financial Inclusion, Among Other
• Privacy Concerns Hinder Widespread Adoption
• Ripple Estimates $5 Trillion CBDC Circulation in Next 10 Years
• Governments Collaborating with Ripple to Develop CBDC Infrastructure

Ripple has always been vocal about supporting central bank digital currencies (CBDCs) and again underscored their potential benefits in a new whitepaper.

On December 14, Ripple issued a 23-page document explaining the basics of CBDCs, potential benefits, risks, and barriers to widespread adoption. 

CBDCs Enable Financial Inclusion, Among Other

Blockchain-based digital payments company Ripple released a whitepaper on CBDCs highlighting its public support for them. In its document, “CBDCs: The Digital Evolution of Money”, Ripple outlines the basics of CBDCs, their attractiveness, potential risk, and the barriers to widespread adoption. The company explained that among its many benefits, CBDCs encourage financial inclusion, simplify cross-border payments, and work to reinforce monetary policy control. Ripple’s primary focus is providing cross-border payment solutions, and it recently updated its crypto-enabled cross-border payment solution, Ripple Payments. The document further explained CBDCs’ benefits for asset tokenization.  

“CBDCs are needed to support the most significant positive impacts of asset tokenization, an increasingly targeted mechanism for transforming tangible assets into digital tokens stored on the blockchain.”

Ripple also took the opportunity to note the “Benefits of Ripple CBDC Platform.” According to the company, the Ripple CBDC Platform offers numerous benefits to users, including:

• Stability, security and resilience;
• Financial inclusion through easy wallet access to funds;
• Interoperability with disparate payment systems and overlay services; and
• Reduced energy consumption. 

Privacy Concerns Hinder Widespread Adoption

Ripple’s whitepaper explained what the company sees as barriers to the widespread adoption of CBDCs. Ripple specifically named the lack of a cohesive global regulatory framework, a lack of end-user adoption, a lack of public knowledge about CBDCs, privacy concerns and issues with security, and a lack of interoperability between CBDCs and offline access to transactions. It states:

“A growing number of stakeholders are voicing concerns over potential government tracking and surveillance activities related to CBDCs.” 

Ripple explains the issues currently hindering mass adoption must be solved at scale and will often require international coordination to ensure continued and faster growth, but states these issues “aren’t unsolvable.”  

Ripple Estimates $5 Trillion CBDC Circulation in Next 10 Years

In its document, the company explains while challenges remain, CBDCs have “exciting potential.” Ripple estimates that $5 trillion of CBDCs in various currencies will circulate through major economies over the next 10 years.

Ripple concluded by stating:

“As CBDC development and uptake quickens, a markedly new arc in the history of money is expected.

Importantly, how the underlying technology is implemented, and monetary policies are set will determine whether sovereign-backed digital assets open the door to enhance global trade and financial inclusion or maintain the siloed, inefficient status quo.”

Governments Collaborating with Ripple to Develop CBDC Infrastructure

Many countries worldwide have approached Ripple to “develop performant, future-proofed financial infrastructure powered by blockchain to mint, manage, transact, redeem and destroy CBDCs.”

Bhutan’s central bank, the Royal Monetary Authority (RMA), announced it is piloting its CBDC using Ripple technology to improve financial inclusion among its citizens and to encourage cashless payments. Montenegro also announced that its central bank is exploring a CBDC with Ripple. The Republic of Palau and Colombia’s central bank have also enlisted Ripple to investigate CBDCs. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.