The central bank of Bhutan, a tiny nation in southern Asia, has recently decided to create a digital version of its fiat currency, the ‘Ngultrum’.
The nation will work hand in hand with Ripple, a cryptocurrency and payments company, in order to put the digital money through its stages of development. The Royal Monetary Authority, i.e. Bhutan’s central bank will use Ripple’s CBDC Private Ledger to pilot a new central bank currency project.
As part of a collaboration with Ripple, the Royal Monetary Authority of Bhutan will be experimenting with a central bank digital currency (CDBC) model that is planned to be based on Ripple’s technology. According to the central bank, several types of payments will be accepted in the pilot test and this includes retail and cross-border payments, as well as wholesale transactions.
Bhutan Is Determined To Increase Financial Access To Locals
This trial is yet another country’s approach to digital currencies as a way of improving people’s access to financial services. As a result of these digitization efforts, Bhutan expects that 85 percent of its people will have access to the financial sector by the year 2023.
In a statement, Yangchen Tshogyel, the Deputy Governor of the Royal Monetary Authority of Bhutan, said that the institution selected Ripple because it will enable them to improvise their current infrastructure.
The integration of the digital ledger with their current payments infrastructure — while also guaranteeing efficient and cost-effective cross-border transactions — will be made possible by Ripple’s innovative technology, says Tshogyel.
The Royal Monetary Authority will test the project in stages along with its existing payments infrastructure and experts believe this will be a move that may be followed by other developing countries.
Tshogyel believes that the country’s cooperation with Ripple is a testimony to the potential of Ripple’s Digital Ledger to offer an alternative and sustainable digital payment instrument in the country.
In 2019, the country had already launched the Global Interchange for Financial Transactions system which allows the electronic transmission of huge sums of money and high numbers of payments. Bhutan is known to be active in exploring the deployment of central bank digital currencies, following several countries in the Middle Eastern and European region.
Last March saw Ripple begin testing a private version of its popular open-source XRP Ledger for central bank-backed digital currency issuance, which was previously only available in public beta.
About Ripple’s Digital Ledger
In the beginning, Ripple promised that its CBDC Digital Ledger would be capable of processing tens of thousands of transactions per second (TPS), with the possibility for scaling up to hundreds of thousands of TPS.
According to the company, it also promotes the use of its in-house cryptocurrency as a neutral bridge asset, enabling frictionless value transfer between CBDCs and other currencies
Though Ripple has been heralded as the go-to platform for remittances and bank-related applications — and even as a kind of SWIFT replacement — this is the first time the company has taken part in a CBDC trial.
The one-of-its-kind ledger is powered by Ripple’s consensus algorithm, which is based on proof-of-stake, making it suitable for large-scale payment transactions.