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Ripple’s partner Accenture, the business and technology consulting firm, has released a document with SWIFT on the potential of central bank digital currency (CBDC) payment solutions. Entitled “Exploring Central Bank Digital Currencies: How They Could Work for International Payments,” the document claims there is growing interest in these types of assets.
Accenture is a Fortune Global 500 company. Along with Ripple, BMW, Bosch, Blockchain Acceleration Foundation, Arxum, Consensys, Crypto Valley, Constellation, Continental, CPChain, DLT Labs, Enterprise Ethereum Alliance, Ford and others, Accenture is part of the Mobility Open Blockchain Initiative (MOBI).
According to the document, at least half of the world’s central banks plan to develop a CBDC. Three main factors contributed to this trend: reducing physical notes, countering the effect of private cryptocurrencies as a threat to fiat money, and improving security in wholesale markets. The document says:
Whatever the motivation, the push for CBDCs seems clear and growing. Some central banks are already conducting live experiments, and some are framing the potential of currency evolution as a possible revolution in how value is exchanged.
Two additional reasons for the increased interest around CBDCs are the potential push for financial inclusion for less developed markets, as the paper states, and allowing payments innovations.
Current trends suggest that Accenture and SWIFT made 4 assumptions. First, there is a high possibility that CBDCs will be issued by “many central banks” both domestically and abroad. Thus, these assets could strengthen a new economy based on digital transactions.
A reduction in the fiat money supply. A banking institution could have more control over the liquidity of its financial system. In addition, the distribution of this type of assets could be under greater control of the authorized institutions. They could leverage tokens or digital wallets to provide “accounts” to users.
Ripple and the XRP ledger as a bridge to CBDC
The document states that commercial banks could play an important role as providers of CBDC for their clients. Rather, these assets will need to have two key characteristics: infrastructure and interoperability for cross-border payments and other use cases. The document states the following, with potential room to apply one of Ripple’s XRP-based solutions:
The concept of CBDCs moving across borders is complex. It is technically achievable with various technologies, but the meaning and use of a CBDC outside of its native jurisdiction is unclear. To be practical, there must be some kind of exchange mechanism with the local currency. (…) What will be required is a multilateral exchange mechanism that allows payments to be made from one end to the other without friction.
The report focuses on how SWIFT will play a role in driving CBDCs forward. Ripple has taken an active role in this area. Brad Garlinghouse, CEO of Ripple, revealed in late January 2021 that there have been meetings with banking institutions to issue CBDCs.
The document has gained a lot of attention from the XRP community. Popular community member WrathofKahneman shared the news, but stressed that the document should not be construed as a sign of a partnership between the 3 companies:
(…) Accenture clearly has multiple relationships with a large number of companies. The only certainty is that there is great interest in the intersection of cross-border transactions and CBDCs.
XRP is trading at $ 1.46, at the time of writing, with a sideways move on the lower time frame. On the weekly and monthly chart, XRP has a 6.2% loss and a 6.5% gain, respectively.
XRP moving sideways on the 24-hour chart. Source: XRPUSDT Tradingview
