The move is driven by Bhutan’s desire to enhance digital and cross-border payments.
By Staff Reporter
The Royal Monetary Authority (RMA) has partnered with Ripple to use its infrastructure to pilot a central bank digital currency.
According to an announcement from Ripple, the move is set to expand the country’s financial inclusion efforts and extend its commitment to sustainability as it aims to become the only carbon-negative country in the world.
The RMA is set to use Ripple’s CBDC Private Ledger to launch a digital Ngultrum (BTN) in phases. The phased launch will help Bhutan accelerate its mission to increase financial inclusion in the country to 85% by 2023.
Using Private Ledgers will also enable the RMA to access a network of other CBDC Ledgers that will provide full settlement interoperability with other central bank digital currencies.
This isn’t the first time Bhutan made the news for digital innovation. In 2019, the RMA launched the Global Interchange for Financial Transactions (GIFT) system which enables electronic transfers of large value and bulk payments.
The system was designed to complement e-PEMS, the government’s expenditure management system, and streamline transactions between the government and banking systems in the country.
“We couldn’t be more thrilled to partner with the RMA on its CBDC agenda and foster our shared values in creating a more sustainable, accessible, and financially inclusive reality,” said James Wallis, the VP of Central Bank Engagements at Ripple. Wallis explained that Ripple’s solution will offer the RMA greater control over issuance, management, privacy, and validation than it would get with public block chains. Aside from privacy, the CBDC solution will also provide the RMA with a network that can handle payments at the volume required to make the digital Ngultrum a viable payment method.
“Our collaboration with Ripple is testament to the potential of CBDCs to provide an alternative and sustainable digital payment instrument in Bhutan,” said YangchenTshogyel, the deputy governor of the Royal Monetary Authority of Bhutan.
According to her Ripple’s groundbreaking technology will allow for the experimentation of a CBDC with our existing payments infrastructure—while ensuring efficient and cost-effective cross-border transfers.
Further, building atop its current payments infrastructure, the Royal Monetary Authority will pilot retail, cross-border and wholesale payment use cases for a digital Ngultrum in phases using Ripple’s blockchain technology.
Ripple began testing a private version of its public, open-source XRP Ledger for central bank-backed digital currency issuance in March
The firm claims that its CBDC Private Ledger will be capable of handling tens of thousands of transactions per second (TPS) initially, with the potential to scale to hundreds of thousands TPSs over time.
The firm is also touting the use of its in-house cryptocurrency XRP as a neutral bridge asset for frictionless value movement between CBDCs and other currencies.