On Friday (February 11), the Digital Euro Association (DEA) announced that it was “delighted” about a new partnership with FinTech firm Ripple.
The Digital Euro Association (DEA) is “a think tank specializing in central bank digital currencies (CBDCs), stablecoins, crypto assets, and other forms of digital money.” Its mission is “to contribute to the public and political discourse through research, education, and by providing a platform and community for policy-makers, technologists, and economists to discuss digital money-related topics.” It’s “committed to independence and excellence, aiming to set the agenda and to shape policy by encouraging new ideas and forward-thinking in the field of digital money.”
In a blog post published on February 11, the DEA started by talking about Ripple’s experience with ce tral bank digital currencies (CBDCs):
“Ripple, one of the leading providers of enterprise blockchain and crypto solutions for cross-border payments, has recently developed a blockchain-based infrastructure to support CBDCs and is engaged with Bhutan’s central bank, amongst others, to help execute their CBDC pilot. Ripple is also a member of the Digital Pound Foundation and continues to extend its efforts around CBDCs worldwide.“
Jonas Gross, Chairman of the Digital Euro Association, had this to say:
“We are thrilled that, due to the partnership with Ripple, we can extend the technological expertise of the DEA community. As more and more CBDC projects worldwide reach advanced stages, technological design of a CBDC will play a key role for policy-makers in the near future, while previous years focused primarily on research.“
And James Wallis, VP of Central Bank Engagements at Ripple, stated:
“We are excited to join the Digital Euro Association as a supporting partner to further develop our work in the CBDC area. The DEA is working across Europe and global markets to drive the development and growth of CBDCs and, specifically, the Digital Euro. Ripple has invested significantly in the CBDC world, with a team of around 40 people globally, helping develop and deliver solutions for CBDCs and stablecoins. We look forward to working with the DEA to further our work on CBDCs over the next few months.”
In a blog post published on 3 March 2021, Ripple said that more than 80% of the world’s central banks are “actively exploring some form of sovereign-backed cryptocurrency”, and that eventually there would be a wide range of central bank digitial currencies (CBDCs).
Ripple said that existing public blockchains cannot meed the needs of CBDCs since “a Central Bank requires more transaction privacy and control over its currency than a public ledger can offer,” which means that it is “most likely opt to create a CBDC on a private ledger that can also operate at the required scale.”
Also, it mentioned that interoperability is crucial:
“Additionally, interoperability – the ability for a private ledger to connect with today’s existing global financial infrastructure, as well as other CBDCs and other digital currencies– will be critical. In fact, in its 2021/22 innovation program, the Bank for International Settlements identified interoperability for cross-border payments as a major priority for CBDCs.“
Ripple’s proposed solution to this problem is the CBDC Private Ledger, which uses the same distributed ledger technology as the XRP Ledger, which means that it is “built for payments” and “designed for issuing currencies”; XRP could then serve as “a neutral bridge asset for frictionless value movement between CBDCs and other currencies.”
Ripple went on to say that transactions on the CBDC Private Ledger would be low-cost, reliable, and fast; initially, it will handle tens of thousands of transactions per second (TPS) ” with the potential to scale to hundreds of thousands TPSs over time.”
Since then, Ripple has been “engaged with Central Banks around the world to better understand their goals and assess how the CBDC Private Ledger can help achieve them.”
XRPL co-creator and Ripple CTO David Schwartz sent out the following tweet following that blog post:
And Monica Long, General Manager of RippleX, “Ripple’s initiative to create an open developer platform for money”, tweeted:
On the same day, Matt Hamilton, Director of Developer Relations at RippleX, clarified a couple of things for members of the XRP community:
- “The public ledger is built for payments. And it was built nearly a decade ago, long before banks knew how they would use blockchains. This gives the best of both worlds, a ‘private’ blockchain for intra-bank, but linked to a public one for inter-bank.”
- “Every single custodial exchange (Bitstamp, Binance, Kraken, Gemini, Coinbase, etc) is a ‘private ledger’. Just run on closed-source software. This is the same, but open source, and decentralised (within that entity).”
Then, on 22 September 2021, Ripple announced a partnership with the central bank of the Kingdom of Bhutan, which is a landlocked country in the Eastern Himalayas. According to its blog post, the basic idea of this partnership is to help Bhutan’s central bank (aka “Royal Monetary Authority”) “use Ripple’s CBDC solution to pilot a central bank digital currency (CBDC) in phases.”
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