Payments company Visa has announced a partnership with blockchain software company Consensys to offer an on-ramp of central bank digital currencies (CBDCs) to existing payment networks.
Visa and ConsenSys partnership
According to the official press release, the end goal is to enable CBDC networks to seamlessly connect with traditional financial service providers. With the latest partnership, the two entities aim to create an infrastructure that will allow banks and issuer processors to “plug into the module and integrate their existing infrastructure” and be able to release CBDC-linked payment cards or wallet credentials for clients.
Catherine Gu, CBDC lead at Visa, revealed that she is integrating her module with the ConsenSys Codefi CBDC sandbox, powered by ConsenSys Quorum, to prepare the payment giant to explore enterprise blockchain technology.
ConsenSys Quorum is quite similar to the Ethereum protocol but is designed specifically for enterprise applications. In short, Quorum is an open-source version of Ethereum, taking advantage of what Visa and ConsenSys aim to build a “two-tier CBDC system” for central banks to issue and distribute CBDCs.
For the uninitiated, ConsenSys has worked with several central banks and organizations such as the Hong Kong Monetary Authority, Reserve Bank of Australia, and Bank of Thailand to test CBDCs.
“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.” – Added Gu.
Shailee Adinolfi, director of strategic sales at the blockchain company, noted that central banks and smaller banks are interested in exploring Quorum through the pair’s “CBDC sandbox.” Adinolfi cited increased adoption of Ethereum Mainnet and Layer 2s as the reason, in addition to “shared common standards and interoperability between private and public networks.”
In addition, the two teams intend to work on pilot and prototype cases by this spring.
Challenges with CBDCs
The not-so-sudden explosion of cryptocurrencies has prompted central banks to release digitized versions of their national currencies. Several countries are exploring use cases for CBDCs, but there are several challenges when it comes to launching one.
According to Gu, central banks should focus on building stability, resilience, and security in their CBDC ecosystem at a fundamental level. End-user and CBDC integration with traditional infrastructure should also be considered. The executive added,
“These are challenges that would be very costly and technically difficult for central banks to tackle on their own. To do this better, we believe that public-private partnerships and a strong focus on end-user experience will be key.
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