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Ripple eyes a substantial share of the projected $5 trillion central bank digital currencies (CBDCs) market as the landscape evolves.
In a report titled “CBDCs: The Digital Evolution of Money,” Ripple highlighted that the transformative potential of CBDCs and stablecoins is becoming increasingly evident, with 98% of the world’s countries pursuing the project.
Ripple noted that CBDCs and stablecoins present a powerful catalyst for digitizing entire economies and unlocking the vast potential of the Internet of Value.
130 Countries Pursuing CBDC Projects
Ripple cited that 130 countries, representing 98% of global GDP, actively pursue CBDC projects. The United States, South Africa, and various European Union nations are in exploratory phases. Also, the report stated that 19 G20 countries are now in advanced stages of their CBDC project.
On the other hand, China is nearing a full-scale launch after completing a pilot phase. Meanwhile, in countries like Nigeria and the Bahamas, CBDC solutions are live, with their applications progressing.
Amid this trend, the Bank for International Settlements has projected that approximately 20% of the global population will possess access to a CBDC in the coming years.
Systematic Objectives CBDCs Can Address
Citing McKinsey, Ripple emphasized the systematic objectives CBDCs can address. These include financial inclusion, fraud reduction, payment innovation, and a new avenue for monetary policy.
Furthermore, the Ripple CBDC report highlighted that CBDCs play a crucial role in facilitating the positive impacts of asset tokenization. Tokenization allows transparent tracking of asset transfers and ownership changes.
Moreover, it pointed out the benefit of wholesale CBDCs, designed for large-scale securities transactions and interbank transfers. Ripple stated wholesale CBDCs enhance operational efficiency with faster settlement times and increased liquidity.
New Risk Factors
Although CBDC deployment is anticipated to bring benefits, it also introduces new risk areas. According to Ripple, the nature of these risks may vary depending on the chosen design models.
Some of the highlighted new risk factors include heightened centralization of payment processing and the storage of sensitive user data. Additionally, Ripple stated there may be increased difficulty in reversing fraudulent or erroneous transactions.
Another risk factor is the increased reliance on third parties or non-bank entities, potentially introducing additional vulnerabilities.
Ripple Moving to Capture CBDC Market Share
Nonetheless, Ripple recognized these risks and opportunities and aimed to position itself as a key player in the CBDC ecosystem. Projections suggest that around $5 trillion worth of CBDCs in different currencies will circulate in major economies over the next decade.
Ripple concluded that the extent to which governments and private sector entities explore these challenges and collaborate on solutions may determine when the innovative currency will transform the world.
It is worth mentioning that Ripple actively collaborates with more than 20 central banks worldwide for CBDC projects. For instance, Ripple’s partnership with Bhutan has entered a pilot phase for 2024.
Similarly, the apex bank of the Republic of Georgia has picked Ripple as its tech partner for its pilot 2.