Visa launches pilot program for central banks to test digital currencies: Report

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Visa will pilot a program in April this year that will give central banks a way to test retail applications for digital currencies (CBDCs), according to a Bloomberg report. The company is launching this program in collaboration with ConsenSys Inc., a blockchain software company, the report adds.

Visa has had a discussion with nearly 30 central banks about their goals for CBDCs, according to the report. Its partner, ConsenSys, has already worked with several central banks to test CBDCs, including the Hong Kong Monetary Authority, the Reserve Bank of Australia and the Bank of Thailand. The company is led by Ethereum co-founder Joseph Lubin.

Several central banks are exploring the option of CBDCs as a bulwark against the growing popularity of cryptocurrencies. Many of these banks view crypto as an existential threat. The pilot program could prove useful in facilitating faster deployment of CBDCs given Visa’s expertise in processing huge volumes of payments.

Mastercard has its own pilot program

Mastercard had announced its own virtual test environment for central banks to evaluate CBDC use cases in September 2020. The platform enabled the simulation of CBDC issuance, distribution and exchange between banks, financial service providers and consumers.

The company had invited central banks, commercial banks, and technology and consulting firms to evaluate CBDC technology designs, validate use cases, and assess interoperability with existing payment rails available to consumers. and businesses.

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What are CBDCs? These are digital currencies designed to be equivalent in value to a country’s paper currency and subject to the same government-backed guarantees.

Which countries have piloted their CBDC program?

  • China: The country has banned almost all virtual currencies in order to promote its digital yuan. It is currently in the pilot stage. It started its work in 2014 and therefore has a considerable head start.
  • Sweden: The Swedish Riksbank launched its CBDC project, e-krona, in March 2017. The project aims to ensure instant payments at all times while exploring offline usability.
  • Bahamian: The Bahamas was the first jurisdiction to fully launch its CBDC. The Central Bank of the Bahamas (CBoB) launched the Sand Dollar in October 2020, after conducting several pilots.
  • Nigeria: Nigeria issued eNaira in October 2021. It was designed to complement Nigeria’s physical currency, not replace it. eNaira was developed by fintech company Bitt, whose Digital Currency Management System (DCMS) is also behind the Eastern Caribbean Central Bank CBDC.

Where is India with its own CBDC project?

Reserve Bank of India Governor Shaktikanta Das recently said that the central bank must protect CBDCs from digital fraud and cybersecurity risks before rolling them out. Das explained that the central bank had major concerns over counterfeit Indian banknotes a few years ago. “Similar things can also happen when you launch the CBDC,” he claimed. Das said the RBI will be cautious and take preventive measures to prevent fraud.

This may indicate that the central bank may not be rolling out CBDCs anytime soon as it continues to address the risks plaguing digital currencies.

Moreover, RBI Deputy Governor T Rabi Shankar disclosed that the bank is working on two types of CBDCs: wholesale and retail.

“A lot of work has been done on CBDCs based on wholesale accounts. The retail side of the CBDC is complicated and it will take time. The first side to prepare will be released for the pilot first,” said T Rabi Shankar.

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