- Ripple Labs is an institution which facilitates international and cross-border payments with XRP.
- The Government of Bhutan is taking advantage of Ripple’s ledger to develop a CBDC of its own.
- The country aims to bring financial inclusion to all its citizens by 2023.
What did Ripple announce?
The Central Bank of Bhutan has partnered with Ripple labs to launch a Central Bank Digital Currency trial in the country. The central bank has chosen Ripple labs as its partner for the CBDC prototype due to its advanced ledger system and seamless cross-border payment experience. Thus, Ripple Labs will integrate its distributed ledger system with Bhutan’s existing payment system so as to create the CBDC.
A CBDC, as the name suggests, is a legal tender issued by the government of a country in the form of a digital asset. The Government of Bhutan has executed this action so as to adapt to the dynamic new technology for the welfare of its country and its citizens.
According to Ripple Labs, the partnership was established due to the intense motives of the Royal Monetary Authority or the RMA of Bhutan. The regulator intends to improve cross-border payments with less traffic and costs. In addition to this, it intends to extend financial inclusion to all of its citizens living there and abroad. Due to lack of knowledge, the citizens of Bhutan are unaware of financial technology. The RMA is motivated to bring change to the country with the launch of the CBDC.
Moreover, apart from the welfare of its citizens, the RMA has considered environmental concerns in its pursuit of the CBDC. The RMA intends to make Bhutan the first ever country with a carbon negative footprint so as to ensure the sustainability of the environment. Ripple’s XRP is known for its relatively higher energy efficient features than most proof-of-work blockchains.
What are the benefits of the CBDC?
Ripple’s issued CBDC will leverage the private functions of the public blockchain ledger of XRP in order to maintain security of transactions. The authenticity of transactions has been proved as more than 4,500 securities have been exchanged through the XRP ledger seamlessly across borders. Thus, the CBDC developed on the decentralized ledger system of Ripple will ensure autonomy of the government and greater control over its regulation, supply, issuance and privacy management.
Apart from the privacy and security, Ripple’s network has enough capacity to handle large volume transactions within seconds. Being an experienced company in global payments, Ripple has developed an established network which caters to the retail CBDC having volumes of huge size. Thus, the RMA need not compromise on its monetary policies or alter the volumes on transactions.
Through the XRP ledger, the transactions are cost effective and take place almost immediately between two or more parties. Thus, the need for tangible currencies will vanish in a few years and the RMA’s aim of financial inclusivity will be achieved by 2023, as per estimations.
Ripple labs is also set to benefit from this partnership. Its association with a Government will improve its stance against the SEC’s lawsuit.