thecryptobasic.com
XRP community members wonder how the crypto can work as a bridge currency for CBDCs as the race to find a solution for CBDC interoperability in cross-border payments heats up.
Attorney Jeremy Hogan, who has built a reputation as an XRP supporter, today shared some chat artificial intelligence (AI) provided answers on how the XRP Ledger can interact with central bank digital currencies (CBDCs).
The lawyer did this in response to questions from a user on Twitter on how XRP can serve as a bridge currency for CBDCs.
Firstly, Hogan, sharing the AI-based answers, noted that CBDCs could be used on the XRPL as IOUs represented by a token on the blockchain to take advantage of the network’s scalability, which makes it well-suited for payments. Secondly, Hogan said central banks could open portals for CBDC withdrawals and deposits on the XRPL to allow its use alongside XRP and other XRPL-based tokens. Finally, the lawyer revealed that the AI suggested that CBDCs could be created as stablecoins on the XRPL.
The XRP Ledger could interact with CBDCs in a few different ways.
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
— Jeremy Hogan (@attorneyjeremy1) January 26, 2023
It is worth noting that in recent years, central banks have allocated resources toward developing CBDCs to increase monetary policy controls and fix the shortfalls of fiat in cross-border settlements. With this trend, a race has started to proffer a solution for CBDC cross-border payments.
In a CBDC white paper released in 2021 dubbed “The Future of CBDCs,” Ripple suggested using neutral bridge currencies, specifically XRP. The firm indicated that CBDCs could be exchanged for XRP, which will be sent to a local exchange in the destination country to be exchanged for the local CBDC. It is similar to its On-Demand Liquidity (ODL) solution, which now serves nearly 40 payout markets representing about 90% of the foreign exchange market.
Meanwhile, Ripple is not without competition. Hong Kong-based cloud infrastructure firm Red Date Technology, German-based IT firm GFT and DLA Piper using TOKO, a digital asset engine, announced Universal Digital Payment Network (UDPN) at the World Economic Forum at Davos. Per a press release released yesterday, it is a distributed ledger technology focused on proffering a solution to interoperability between stablecoins.