Pilot study provides insights into the possible benefits and considerations of utilizing a potential U.S. CBDC to enable cross-border payments using a DLT platform. Highlights real-word use cases and data-informed frameworks for the application of CBDCs across the retail and commercial sectors.
The Digital Dollar Project announced the completion of a pilot study conducted in collaboration with The Western Union Company, BDO Unibank, Inc. in the Philippines, and support from Accenture. This collaboration represents the Digital Dollar Project’s latest private sector efforts in support of the exploration and experimentation of a central bank digital currency (CBDC) in the United States.
Amidst an ever-evolving international payments landscape, retail cross-border remittances serve as a critical lifeline for millions of family members and loved ones worldwide who receive payments from US-based customers. The pilot study, executed in concert with a leading, technology-driven global payments player, evaluated the potential benefits of utilizing CBDCs for cross-border remittances. Participants designed and configured a platform leveraging distributed ledger technology (DLT) to simulate the payments infrastructure necessary to transfer digital dollars to Philippine pesos. The findings have been published in the Digital Dollar Project’s whitepaper, „Retail Cross-Border Remittance Payments.”
„As conversations around CBDC and a ‘digital dollar’ mature, this cross-border payment pilot is a timely step towards understanding the impact and generating highly-applicable data for retail CBDC use cases,” said Jennifer Lassiter – Executive Director of The Digital Dollar Project. „With the support of Western Union and other DDP partners, we will continue to generate the needed research and data to map feasible, real-world use cases that speak to financial institutions, policymakers, and technological partners.”
As the role of digital money transfers grows, Western Union is innovating to meet new patterns of consumer demand and continuing to embrace and implement advanced technology systems. Unlike private cryptocurrencies such as Bitcoin, a U.S. CBDC would be issued and backed by the Federal Reserve, just like U.S. paper dollars and coins. A U.S. CBDC could ensure a more secure and reliable transfer of digital money for individuals and their families, who often rely on fund transfers to meet basic needs.
„Through this pilot study, Western Union has identified several advantages for customers and financial institutions, laying the groundwork for ongoing evaluations of the feasibility and viability of utilizing retail CBDCs for cross-border remittances,” said Kevin Mole, Global Head of Digital Assets at Western Union.
The key benefits highlighted throughout the study include:
Reduced Risk: Instant settlement across multiple currencies reduces counterparty and credit risk for customers and their financial institutions.
Optimized Cost: CBDC settlement allows for transferring value and message in a single transaction, settled atomically, thereby reducing the cost of capital held in pre-funded accounts.
Enhanced Customer Experience: A digital dollar increases the accessibility and portability of money in a digital form to benefit the unbanked and underbanked. A verified digital wallet can help reduce fraud, enable faster settlement, harmonize jurisdictional requirements, and minimize failed transactions.
Improved Visibility: Using a permissioned ledger provides institutions and their customers with enhanced transaction visibility, bolstering customer trust.
Results from this pilot study serve as a foundation for future experimentation, defining the essential elements of a cross-border remittance within a DLT context, including CBDC Issuance, Transaction Management, Hosted Customer Wallets, and Currency Exchange. Additionally, the findings will provide government agencies with the design elements necessary for scaling a potential U.S. CBDC in real business contexts.
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The DDP is committed to providing the federal government, policymakers, and private sector organizations with a stronger, clearer picture of what implementing a CBDC in the U.S. would look like and answering essential questions of what a roll-out might entail across retail, wholesale, and international use cases.
A nonprofit organization, The Digital Dollar Project, was created to encourage research and public discussion on the potential advantages and challenges of a U.S. CBDC — or a „digital dollar.” The Digital Dollar Project will identify options for a CBDC solution to help enhance monetary policy effectiveness and financial stability; provide needed scalability, security and privacy in retail, wholesale and international payments; and integrate with existing financial infrastructures, including U.S. Federal Reserve-related projects.
Banking 4.0 – „how was the experience for you”
„So many people are coming here to Bucharest, people that I see and interact on linkedin and now I get the change to meet them in person. It was like being to the Football World Cup but this was the World Cup on linkedin in payments and open banking.”
Many more interesting quotes in the video below:
