Mastercard announces simulated CBDC ecosystem

Posted: 11 September 2020 7:36 pm

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Central banks are looking for a private sector hand as they look ahead to digital currency.

Earlier this week Mastercard announced a virtual testing environment for central bank digital currencies (artist's representation above), to simulate a central bank digital currency (CBDC) ecosystem. It's intended to let central banks, commercial banks, tech companies and other involved parties simulate the issuance, distribution and exchange of CBDCs between banks, financial service providers and users.

Participants can simulate scenarios including CBDC issuance and distribution, interfacing with existing payment networks and users paying with digital currency anywhere Mastercard is accepted, to test the feasibility of various CBDC designs.

Mastercard invites any entities whose jam this is to check it out.

CBDC ecosystem

"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," said Sheila Warren, head of blockchain and digital assets at the World Economic Forum. "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."

One constant in most talk of CBDC ecosystems is the need to encompass both the public and private sector, and the entire rise of CBDCs is somewhat predicated on the idea of central banks pulling some control back from private sector-driven digital currency plans such as Libra.

While Mastercard was once a Libra Association member, it later withdrew under regulatory pressure. As such, this initiative could suggest a new tack in helping bridge public-private sector gaps around CBDC. It may also be very welcome for many of the world's central banks, most of which got a bit blindsided by the ascent of digital currencies.

"Central banks have accelerated their exploration of digital currencies with a variety of objectives, from fostering financial inclusion to modernising the payments ecosystem," said Raj Dhamodharan, Mastercard executive VP of digital asset and blockchain products and partnerships. "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."

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