Over the past few years, Mastercard Inc. has been working on testing a distributed ledger blockchain platform for allowing central banks to exchange currency. Now the financial services giant is ready to launch a Central Bank Digital Currency test platform for that purpose.
According to the Bank for International Settlements, 80% of central banks surveyed have engaged in some form of Central Bank Digital Currency work, and about 40% of central banks have progressed from conceptual research to experimenting with concept and design.
Mastercard’s proprietary virtual testing environment, the “Mastercard Content Exchange,” will evaluate CDBC use cases for central banks and enable the simulation of issuance, distribution and exchange of CDBCs between banks, financial service providers and consumers.
Central banks, commercial banks and advisory firms are invited to partner with Mastercard to access the CDBC models, validate use cases and evaluate interoperability with existing payment trials for customers and businesses.
“Central banks have accelerated their exploration of digital currencies with a variety of objectives, from fostering financial inclusion to modernizing the payments ecosystem,” said Raj Dhamodharan, executive vice president of digital asset and blockchain products and partnerships at Mastercard. “This new platform supports central banks as they make decisions now and in the future about the path forward for local and regional economies.”
In concept, a CDBC is designed to be the equivalent in value to a nation’s paper currency and subject to the same government-backed guarantees.
In addition to printing money, central banks can issue CDBCs as a digital representation of a country’s fiat currency. Because it is digital, instead of a physical item, it need not be shipped by truck, so it can be moved across the internet instead.
“Collaborations between the public and private sectors in the exploration of Central Bank Digital Currencies can help central banks better understand the range of technology possibilities and capabilities available with respect to CBDCs,” said Sheila Warren, head of blockchain, digital assets and data policy at the World Economic Forum.
On this virtual test platform, participants will be able to access individually customized environments to simulate a CDBC issuance, distribution and exchange ecosystems, with banks and consumers; demonstrate how a CDBC can be used by a consumer to pay for goods and services by Mastercard using a blockchain; examine various CDBC technology designs and use cases and determine value feasibility; and evaluate CDBC development efforts in a test environment.
“Central banks can benefit from support in exploring the options set available to them with respect to CBDCs, as well as gaining insight into what opportunities may be forthcoming,” Warren said.
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