The Central Bank of Bhutan, the Royal Monetary Authority (RMA), has partnered with Ripple to start testing a model of its central bank digital currency (CBDC) using Ripple’s technology. The test will be using Ripple’s own CBDC private ledger, to support similar use cases. The pilot test will include retail, cross-border and wholesale payments for the proposed CBDC.
Bhutan Involves Ripple in CBDC Pilot Test
Bhutan, a small country located in the south of Asia, is working on the issuance of a central bank digital currency of its fiat currency, known as the Ngultrum. The nation will be partnering with Ripple, the cryptocurrency and payments company, to pilot test the digital currency in different use cases. The Royal Monetary Authority (RMA), Bhutan’s central bank, will use Ripple’s technology for the tests.
This pilot provides yet another example of a country approaching the digital currency world as a way of improving access for citizens to financial services. In this regard, Bhutan expects these actions to increase the accessibility of its citizenship to the financial market by 85% by 2023.
Yangchen Tshogyel, deputy governor of the Royal Monetary Authority of Bhutan, stated they chose Ripple because it may allow them to use their existing infrastructure. Tshogyel stated:
Ripple’s groundbreaking technology will allow for the experimentation of a CBDC with our existing payments infrastructure — while ensuring efficient and cost-effective cross-border transfers.
Ripple and CBDCs
While Ripple has been touted as the go-to platform for remittances and bank-related applications — and even as a SWIFT replacement of sorts — this is the first time it has been involved in a test of a CBDC. However, this test is not using Ripple’s public ledger. The test is taking advantage of another Ripple technology called CBDC private ledger, which was introduced by the company in March.
The private ledger is powered by Ripple’s own consensus, which is based on proof-of-stake, and according to the company supports tens of thousands of operations per second with negligible fees, suitable for massive payment operations. James Wallis, VP of Central Bank Engagements at Ripple, stated:
We couldn’t be more thrilled to partner with the RMA on its CBDC agenda and foster our shared values in creating a more sustainable, accessible, and financially inclusive reality.
Bhutan now joins other geopolitical regions like China and the EU in actively researching central bank digital currencies for implementation.
What do you think about Bhutan testing a central bank digital currency? Tell us in the comments section below.
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