Ripple’s Vice President of Central Bank Engagements and Central Bank Digital Currencies (CBDCs) James Wallis recently joined the Thinking Crypto podcast to talk CBDCs with host Tony Edward.
After first learning of Bitcoin and blockchain while leading the global payments group at IBM, James quickly became passionate about what he termed a “mind-blowingly amazing” technology because of its ability to create a single source of truth, and the ability to use a token to move value in a much more efficient way than legacy systems.
As the leader at the helm of Ripple’s CBDC initiative, James is responsible for engaging, educating and supporting central banks in their use of digital currencies. In general, he sees three core use cases that most countries are pursuing: greater domestic payments efficiency, improved cross-border payments and expanded financial inclusion.
To support these efforts, Ripple provides central banks with CBDC insights and education, a sandbox to experiment with the technology, and help with both policy and legal considerations. James’ focus is on “real money pilots” that go one step beyond proof of concepts and use Ripple’s CBDC solution built on the XRP Ledger to mint, manage, transact and redeem digital currencies.
James and his team are working on a number of new Ripple-led CBDC projects around the world – including some in Europe – while Ripple continues to expand the well-documented work with the countries of both Bhutan and Palau.
Bhutan is a carbon negative country in the Himalayas with high mobile phone usage but low levels of financial literacy. The country’s Royal Monetary Authority is partnering with Ripple to explore a CBDC that could improve financial literacy and accelerate its use of new technologies while meeting the nation’s sustainability requirements. Ripple has now completed a wholesale CBDC pilot with Bhutan’s Royal Monetary Authority and is currently in the middle of a retail CBDC pilot.
Ripple has worked closely with the Republic of Palau to outline a national stablecoin pegged to the U.S. dollar. Describing it as possibly the world’s “first government-issued national stablecoin” once it’s live, James is excited about its potential for improved payments, creative use cases like promoting tourism to help boost the local economy, and its ability to coexist with any possible future U.S. digital dollar.
Prospects for a Digital Dollar
Since the U.S. is a regulatory complex environment it’s likely the road to a US CBDC will be a long journey.
Ripple is engaged at multiple levels with the Federal Reserve and through organizations like the Digital Dollar Project to provide input and resources supporting CBDC research and explorations here in the U.S. He did note that commercial banks are increasingly leaning into conversations about how CBDCs will impact markets and what their role might be. James said this growing interest is a positive sign because it’s difficult to envision a retail CBDC in the U.S. without involvement from commercial banks.
Ripple is working with organizations like the Digital Euro Association and the Digital Pound Foundation to connect leaders on both sides of the aisle and help further digital currency initiatives around Europe and the UK.
As countries explore CBDCs, central banks will have to make a number of important design and deployment decisions. One critical consideration will be around privacy.
In an era of digital currencies, most people in the U.S. and in Europe expect a certain level of privacy when it comes to how they spend their money. Policies under consideration in Europe reflect this by exploring thresholds – similar to how cash is governed today – under which the government would have no visibility into how you travel with or spend your money. But in a digital world, the default expectation is probably that a record of every transaction exists somewhere.
The onus is on policymakers to be clear on how they intend privacy to be protected so that the technology can map to those goals and expectations.
Forecasting Growth in CBDCs
Looking ahead, James expresses a high degree of optimism and excitement about CBDCs in general and Ripple in particular. Despite recent market volatility and lack of regulatory clarity, he remains confident and steadfast in the utility of blockchain and digital assets like CBDCs, and that they will ultimately drive significant breakthroughs.
With over 90% of central banks now exploring CBDCs, James expects many more will go into production at some scale within the next several years. As more CBDCs go live, he believes they will have a halo effect for the broader crypto community. Terming it a “rising tide that will lift all ships,” CBDC adoption could increase familiarity and confidence in other cryptocurrencies while also driving the creation of better ancillary products like more user-friendly wallets.
To deliver on that future reality for CBDCs, the Ripple CBDC team is making great progress with partners, on its product roadmap and in advancing thoughtful conversations around CBDCs more broadly.