invezz.com
The world is ready for a Full-Reserve Digital Currency (FRDC) after Millicent, a distributed ledger fintech company co-founded by the UK government, successfully tested the first FRDC.
Millicent’s FRDC is designed for consumer confidence and safety and is pegged to a traditional fiat currency. They are also 100% collateralized by liquid cash deposits put in a ring-fenced account that is safeguarded by a regulated third party at the central bank.
The test conducted by Millicent was a technology demonstration for innovate UK, which is a branch of UK Research and Innovation, which is the national funding agency that invests in advanced scientific and technological research.
Commenting on the development, the CEO of Millicent, Stella Dyer said:
“We are extremely proud to have presented this world-first solution to Innovate UK—especially during such a turbulent time for the crypto markets. Recent troubles with popular cryptocurrency platforms highlight the importance of projects like Millicent that focus on safety, stability, and real-world benefits.”
An accessible and equitable financial system using blockchain
The Full-Reserve Digital Currency test conducted by Millicent was done in a sandboxed environment and simulated fiat on-ramping through faster payments from one of the UK’s largest consumer banks. It also simulated the on-chain conversion and minting of FRDC tokens pegged on the British Pound Sterling. A variety of payment and settlement scenarios were also tested.
Some of the FRDC use cases that were tested included micropayments like using £0.15 to access a paywalled newspaper article, using a QR code to tip a busker for £1, and higher value peer-to-peer payments.
Some of the major achievements that came out of the Full-Reserve Digital Currency test include low fees and near-instant settlement of the Millicent FRDC network and flexibility among mobile apps, custodial wallets, and non-custodial wallets.
The successful test is a major milestone for Millicent as it aims at building a financial infrastructure that combines the benefits of distributed ledgers and smart contracts with the traditional financial infrastructure. Millicent believes in the use of blockchain to create a handy and equitable financial system for all.
Commenting on the successful test, assessors from Innovate UK said:
“[Millicent] addresses the major shortcomings of the payments industry, both traditional and crypto. Delivering a digital wallet and payment application accessible via iOS/Android apps, with an API for integration with existing web/mobile platforms within this project is courageous and ambitious.”
Full-Reserve Digital Currency better than stablecoins and CBDCs
Although the FRDC could seem to meet the definition of a synthetic Central Bank Digital Currency (sCBDC), Millicent prefers the term Full-Reserve Digital Currency to distinguish it from stablecoins and central bank-issued digital currencies.
In the past few months, stablecoins have come under close scrutiny because of their sometimes risky designs and a lack of transparency that have resulted in significant losses to customers like the case of the Terra LUNA fiasco. Additionally, some members of the general public have also raised concerns with CBDC because of concerns around potential overreach and erosion of privacy.
Full-Reserve Digital Currency (FRDC) is designed to address the concerns with CBDC and stablecoins as the UK quickly moves to embrace regulated digital payments.