Visa and ConsenSys’ new CBDC development platform will enable central banks to create simple, effective and innovative financial services for their customers.
Visa , the multinational financial services company, and ConsenSys , a software provider based on blockchain technology , are preparing a new development platform for CBDC: digital currencies issued by central banks, which will compete with digital economies based on cryptocurrencies and stablecoins , which pose risks for global financial stability, according to regulators. in a statement issued this Thursday, Visa reported that its strategic collaboration with ConsenSys will allow it to take advantage of the company’s experience and technology to promote the development of a new infrastructure based on the Quorum protocol, which can help central banks and financial institutions around the world to create simple and effective services for your customers.
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The new Visa and ConsenSys development platform was born with the vision of connecting traditional finance with the potential and innovation of blockchain. Through a network of CBDCs, central banks will be able to offer a more efficient and reliable experience, which guarantees the permanence of their business over time. The boom in cryptocurrencies and private stablecoins has put at risk, to a certain extent, the effectiveness of central banks and the traditional financial system in general; Therefore, banks are adopting new technologies, in order to create new forms of fiduciary digital money that allow the construction of more efficient and attractive services.
So far, some 110 central banks around the world have declared their interest in developing a CBDC. For its part, blockchain firm ConsenSys has already been collaborating with various governments, including Australia, France, Hong Kong, and Thailand, to help them develop their own CBDC digital currency.
CBDC, financial accessibility
Catherine Gu , Director of CBDC at Visa and Shailee Adinolfi , Director of Strategic Sales at ConsenSys, revealed several of the advantages and utilities that CBDCs bring and that are motivating companies to develop a new digital infrastructure to drive this innovation.
First of all, the executives pointed out that CBDCs can contribute to the expansion of financial services, without inconveniences and without demanding excessive resources. Specifically, Gu pointed out that a central bank can efficiently send fast and secure payments to a wide group of citizens through a CBDC; something that would be extremely useful for cases such as the stimulus payment, “a task that requires immense resources and coordination” if it is done through the traditional financial system.
“Residents of a particular community facing economic hardship could receive immediate government assistance directly to their digital wallets.”
Likewise, Adinolfi emphasized that CBDCs will expand access to financial services to millions of people who are still unbanked or who live in remote places, but who have access to a mobile phone and the Internet.
Challenges of CBDCs
Although CBDCs bring great benefits, they also pose challenges for issuing central banks and their users. For example, one of the biggest concerns surrounding CBDCs and digital currencies in general is security. By issuing a digital currency, the responsible central bank must be able to ensure stability, security and resilience to its citizens, to issue confidence and peace of mind.
On the other hand, central banks must provide tools and products that guarantee optimal service to their citizens and that support massive demand, in order to provide a fluid, intuitive and familiar experience at all times. Likewise, central banks must deal with the risks that the issuance of a CBDC poses for other participants in the traditional financial system, such as commercial banks and financial institutions, whose services and functions could result in the issuance of a new fiduciary digital money. direct.
Interoperability is another of the challenges that CBDCs represent for central banks and to which Visa and ConsenSys seek an effective solution.
The work of Visa and ConsenSys
To help central banks address the challenges of CBDC development and issuance, and to make the most of the potential of these digital currencies, the new platform being developed by Visa and ConsenSys will focus on connecting digital currencies with financial infrastructure. existing. So businesses and retailers can easily accept CBDC payments everywhere from the start and traditional financial service providers can connect with CBDC networks seamlessly.
Also, for bank processors and issuers, companies are devising new functions, such as the issuance of payment cards linked to CBDCs or the issuance of credentials for digital wallets, among others.
Visa cards for central bank digital currencies
Visa, which is the largest provider of credit, debit, prepaid and gift cards, noted that if CBDC networks fit seamlessly with the traditional financial system and existing bank applications, then it could link your Visa cards. to the CBDC, to facilitate digital payments with these currencies in its network of 80 million businesses around the world.
In September 2021, Visa introduced an interoperable payment channel to facilitate the integration of digital currencies with cryptocurrencies. Likewise, in February of that year, it reported that it would integrate cryptoactives such as Bitcoin, Ethereum and stablecoins into its payment network. Cryptocurrencies have become an important part of this financial services provider, as well as competitors such as Mastercard, motivated by the adoption and exponential growth that cryptocurrencies have had in recent years.
Cryptocurrencies and society
Society is changing and the institutions of the traditional system must evolve and adapt to meet the new needs and demands of its users. In this context, CBDCs hold enormous potential for banks to create innovative new services. Visa and ConsenSys noted that despite the many use and application cases that exist for CBDCs today, many more remain unexplored for these digital currencies.