An attorney favored by the XRP community, Jeremy Hogan, who also closely follows the Ripple-SEC lawsuit, has shared his take on how CBDC (central bank digital currency) makers could benefit from utilizing the XRP Ledger. He has shared several possible ways that that may happen.
CBDCs + XRPL
The first option suggested by Hogan was minting CBDCs via XRPL. Central banks could issue their digital currencies on top of the XRP Ledger in the form of an IOU, which would be represented by a particular token.
This method would enable CBDC users to take advantage of quick and efficient settlements provided by the ledger.
The second opportunity for bringing together CBDCs and the XRP Ledger shared by Hogan is a central bank could set up a gateway for its digital currency. This would allow users to withdraw and deposit that CBDC. Besides, the central bank digital currency could be utilized in conjunction with XRP tokens, along with other crypto assets issued on the XRPL.
The XRP Ledger could interact with CBDCs in a few different ways.— Jeremy Hogan (@attorneyjeremy1) January 26, 2023
One possibility is that a CBDC could be issued on top of the XRPL as an IOU represented by a specific token. This would allow for the CBDC to take advantage of the XRP Ledger's fast/efficient settlement times. 1/ https://t.co/LPYG10n8yx
Another option, per Hogan, is that a central bank could issue its crypto directly on the XRPL in the form of a stablecoin in order to ensure cheap and seamless cross-border payments, remittances, etc., at the high speed that XRPL offers.
Hogan jokingly rushed to add that since he is a lawyer and not a blockchain expert, he "has no clue," but all of the above was said by "Chat AI."
Ripple and CBDCs
As reported by U.Today, at the end of last year, Ripple struck a partnership with the central bank of Bhutan in order to provide assistance with its CBDC trial.
The digital currency will be called Ngultrum, and its pilot will be created by The Royal Monetary Authority of Bhutan, in close collaboration with the San Francisco-based Ripple fintech giant.
During the trials, the currency will be used for making cross-border and wholesale payments. The state of Palau is also building a CBDC with the help of Ripple and XRP Ledger.
Overall, in March 2021, Ripple issued a whitepaper, explaining how XRP Ledger could be used by banks to create digital currencies, and XRP would be a bridge currency for that. The paper is called "The Future of CBDCs."
Besides, the CTO of Ripple, David Schwartz, shared the concept of federated sidechains on the XRPL last year; this concept would allow banks to set up their own networks on the ledger.
Aside from CBDCs, XRPL is going to be used as the basis for at least six stablecoins: Stably (USDS), Statis pegged by EUR (EURS), South African XUS and Novatti Group Limited AUDC backed by the Australian Dollar.