Visa experts believe that CBDCs can help facilitate effective distribution of stimulus packages in developed countries and foster financial inclusion in developing countries.
As nations continue to join the CBDC train, payments giant Visa has partnered with Consensys to provide central banks with a way to design and distribute CBDCs.
Using Consensys Quorum, central banks will be able to design their CBDCs and establish their preferred monetary and governance rules. They will then use Visa’s CBDC payment module as a gateway for CBDCs to existing payment networks. The payment module will allow financial institutions to integrate their pre-existing infrastructure and use its network to distribute currency through commercial banks and other financial institutions.
The partnership will start in the spring with a pilot and prototype program in different banks. Already, Visa has had discussions with about 30 banks on discussions around CBDCs.
Head of CBDC at Visa, Catherine Gu, said:
“If successful, the CBDC could expand access to financial services and make government disbursements more efficient, targeted and secure – this is an attractive proposition for policymakers.”
Visa Optimistic About CBDCs Despite Challenges
With this announcement, Visa joins its rival company, Mastercard, in bridging the gap with traditional financing. Recall that earlier in 2020, Mastercard launched a similar CBDC testing platform. Since then, the number of countries exploring the CBDC option has doubled.
Visa experts believe that CBDCs can help facilitate effective distribution of stimulus packages in developed countries and foster financial inclusion in developing countries. However, it is not without challenges. The widespread adoption and acceptance of currencies will depend on the degree of central bank control over the currency. This is even when people are looking for more decentralized payment options. Similarly, CBDCs can challenge local edicts affecting the value of currency.
Despite these challenges, the Atlantic Council’s CBDC tracker suggests that as many as 90 countries are in various stages of CBDC research, testing and development. The Bahamas and Nigeria are two countries that have already started circulating CBDCs. China is also at an advanced stage of development and is pushing for the use of the digital yuan at the Beijing Winter Olympics later this year.
Interestingly, these 90 countries account for up to 90% of global GDP, although the Federal Reserve and some other major central banks are missing from the list. For its part, the US Federal Reserve is expected to publish the results of its research on the feasibility of a government-backed virtual currency soon.
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