In recent years, Mastercard Inc. has been working on testing a blockchain platform distributed ledger to allow central banks to exchange currency. Now, the financial services giant is set to launch a central bank digital currency testing platform for that purpose.
During concept development, Mastercard also was given the task of inviting and conducting an analysis from both central banks and commercial banks and companies to evaluate the convenience of using this type of digital currencies, which comply with State regulations.
According to the Bank for International Settlements, 80% of central banks surveyed have engaged in some form of digital currency work of the central bank, and around 40% of central banks have progressed from conceptual research to experimentation with concept and design.
With this Mastercard asked partners to use the platform to evaluate the effectiveness of the technological designs of the CBDC through a virtual test environment where the simulation of the issuance, distribution and exchange of currencies is carried out, between banks, financial service providers and especially consumers to also validate use cases and evaluate the interoperability with existing proof of payment for customers and businesses.
"Central banks have accelerated their exploration of digital currencies with a variety of goals, from fostering financial inclusion to modernizing the payments ecosystem," said Raj Dhamodharan, executive vice president of digital assets and blockchain products and partnerships at Mastercard. "This new platform supports central banks as they make decisions now and in the future on the way forward for local and regional economies."
In concept, a CDBC is designed to be the equivalent in value to a nation's paper money and subject to the same government-backed guarantees.
In addition to printing money, central banks can issue CDBC as a digital representation of a country's fiat currency. Because it is digital, rather than a physical item, it doesn't need to be shipped by truck, so it can be moved over the internet.
"Collaborations between the public and private sectors in exploring central bank digital currencies can help central banks better understand the range of technological capabilities and capabilities available with respect to CBDCs," said Sheila Warren, Director of blockchain, digital assets and data policy at the World Economic Forum.
In this virtual test platform, participants will be able to access individually customized environments To simulate a CDBC issuance, distribution and exchange ecosystem, with banks and consumers on how a CDBC can be used to pay for goods and services via Mastercard using a blockchain, examine various CDBC technology designs and use cases and determine the value feasibility and evaluate CDBC development efforts in a test environment.
"Central banks can benefit from support to explore the options available to them with respect to CBDCs, as well as to gain insight into opportunities that may arise," Warren said.
It is mentioned that the virtual platform can be individually customized for the environment in which the central bank operates, allowing them to:
- Simulate a CBDC issuance, distribution and exchange ecosystem with banks and consumers, including how a CBDC can interact with existing payment networks and infrastructures, for example, cards and real-time payments.
- Demonstrate how a consumer can use a CBDC to pay for goods and services anywhere in the world where Mastercard is accepted.
- Examine various CBDC technology designs and use cases to more quickly determine value and viability in a market.
- Evaluate CBDC development efforts, including technical construction, safety, and early design and operations testing.