With the global economy racing to embrace digital payments, central banks also are looking to the future and investigating how to support innovation while maintaining monetary policy and financial stability as they issue and distribute currency.
In fact, 80 percent of central banks surveyed are engaging in some form of Central Bank Digital Currencies (CBDCs) work, and about 40 percent of central banks have progressed from conceptual research to experimenting with concept and design, according to a recent survey by the Bank for International Settlements.
Recently, Mastercard announced a proprietary virtual testing environment for central banks to evaluate CBDC usecases. The platform enables the simulation of issuance, distribution and exchange of CBDCs between banks, financial service providers and consumers. Central banks, commercial banks, and tech and advisory firms are invited to partner with Mastercard to assess CBDC tech designs, validate usecases and evaluate interoperability with existing payment rails available for consumers and businesses today.
Mastercard is a leader in operating multiple payment rails and convening partnersto ensure a level playing field for everyone – from banks to businesses to mobile network operators – in order to bring the most people possible into the digital economy. Mastercard wants to harness its expertise to enablethe practical, safe and secure development of digital currencies.
“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, Digital Asset and Blockchain Products and Partnerships, Mastercard. “Mastercard is driving innovation with the public sector, banks, fintechs, and advisory firms in the exploration of CBDCs, working with partners that are aligned to our core values and principles.
“This new platform supports central banks as they make decisions now and in the future about the path forward for local and regional economies,” Dhamodharan added.
Sheila Warren, Head of Blockchain, Digital Assets and Data Policy at the World Economic Forum said, “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. Central banks can benefit from support in exploring the option set available to them with respect to CBDCs, as well as gaining insight into what opportunities may be forthcoming.” CBDCs are designed to be 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 CBDCs as a digital representation of a country’s fiat currency.