Ripple Collaborates with the Digital Euro Association on CBDCs
The Digital Euro Association (DEA) said on Friday (February 11) that it was “delighted” to establish a new relationship with FinTech startup Ripple.
The Digital Euro Association (DEA) describes itself as a “think tank focusing on central bank digital currencies (CBDCs), stablecoins, crypto assets, and other forms of digital money.” Its purpose is to “contribute to public and political debate via research and teaching, as well as by offering a forum and community for policymakers, technologists, and economists to address issues relating to digital money.” It is “dedicated to independence and quality, striving to set the agenda and influence policy in the area of digital money by fostering innovative ideas and forward-thinking.”
The DEA began their blog post on February 11 by discussing Ripple’s experience with central bank digital currency (CBDCs):
“Ripple, one of the leading suppliers of business blockchain and crypto solutions for cross-border payments, has recently created a blockchain-based infrastructure to enable CBDCs and is collaborating with Bhutan’s central bank, among others, to assist carry out their CBDC trial.” Ripple is also a member of the Digital Pound Foundation and is expanding its activities in the area of CBDCs globally.”
According to Jonas Gross, Chairman of the Digital Euro Association: “We are delighted that our relationship with Ripple enables us to expand the DEA community’s technology competence. As more CBDC projects progress to advanced stages internationally, policymakers will increasingly concentrate on the technical design of CBDCs in the near future, while prior years were mostly focused on research.”
Additionally, James Wallis, Ripple’s VP of Central Bank Engagements, stated: “We are delighted to join the Digital Euro Association as a supporting partner, enabling us to expand our efforts in the CBDC sector.” The DEA is promoting the development and expansion of CBDCs and, more especially, the Digital Euro throughout Europe and worldwide markets. Ripple has made considerable investments in the CBDC space, with a staff of over 40 individuals worldwide assisting in the development and delivery of solutions for CBDCs and stablecoins. We look forward to collaborating with the DEA in the coming months to further our research on CBDCs.”
Ripple said in a blog post published on 3 March 2021 that over 80% of the world’s central banks are “currently researching some kind of sovereign-backed cryptocurrency” and that there would ultimately be a plethora of central bank digital currencies (CBDCs).
According to Ripple, existing public blockchains cannot meet the needs of CBDCs because “a Central Bank requires more transaction privacy and control over its currency than a public ledger can provide,” which means it will “most likely opt to create a CBDC on a private ledger that can also operate at the required scale.”
Additionally, it said that interoperability is critical: “In addition, interoperability – the capacity of a private ledger to communicate with today’s global financial infrastructure, as well as with other CBDCs and other digital currencies – will be crucial. Indeed, the Bank for International Settlements designated interoperability for cross-border payments as a top goal for CBDCs in its 2021/22 innovation programme.”
Ripple’s proposed solution to this problem is the CBDC Private Ledger, which utilises the same distributed ledger technology as the XRP Ledger and is, therefore “built for payments” and “designed for currency issuance”; XRP could then serve as a “neutral bridge asset for frictionless value movement between CBDCs and other currencies.”
Ripple said, “Transactions on the CBDC Private Ledger will be low-cost, reliable, and fast; initially, it will handle tens of thousands of transactions per second (TPS), with the ability to expand to hundreds of thousands TPSs over time.”
Since then, Ripple has “worked with Central Banks worldwide to better understand their objectives and examine how the CBDC Private Ledger might assist them in accomplishing them.”