Ripple (XRP) could be a neutral link between CBDCs

Ripple Labs released a whitepaper on the need for CBDCs in the global economy. The paper, titled “The Future of CBDCs,” talks about CBDCs and the issues they would face if released.

According to Ripple, CBDCs are essential to ensure the survival of the fiat system. However, the design and development of CBDCs would differ based on individual countries’ specifications. The difference makes it challenging to conduct cross-border transactions, it said.

The paper said, “It is likely that we will end up with a world of different CBDCs, making interoperability critical. Although most CBDCs focus on solving domestic problems, the global nature of trade and finance means that cross-border coordination is needed, baked into the original recipe of each CBDC.”

Ripple Labs suggested that central banks could solve this problem the same way the world had solved the Internet’s initial problems. The Internet became a tool for information exchange because there was universal agreement to build it using common standards.

The company suggested that CBDCs adopt open payment protocols and use neutral bridge assets to enable effective cross-border transactions. That is where Ripple Labs believes XRP could play a critical role.

“To enable a truly efficient global market, a bridge currency must be optimized specifically for payments and offer the same speed, scalability, low cost, and security that CBDCs offer. An example of a neutral bridge is XRP used for digital assets to bridge two different currencies quickly and efficiently.”

Ripple Labs argued that XRP already plays this role for private financial institutions and can do the same for CBDCs. The company believes that neutral bridges like XRP are the final piece of the interoperability puzzle that will ensure the success of CBDCs.

XRP and Ripple have come under scrutiny in recent months due to their legal battle with the Securities and Exchange Commission.


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