Cryptocurrencies are not well-liked by central governments that look askance at losing control from their own monetary policy. The result is high interest and pilots of Central Bank Digital Currencies. Today Visa announced a partnership with ConsenSys that is designed to link any CBDC to the existing Visa supported payment rails. This technical capability would enable a CBDC to be utilized at any merchant or business that accepts Visa today. This is an excerpt of how Catherine Gu, Visa’s Head of CBDC, explained it in the press release formatted as a Q&A:
“At a foundational level, central banks need to think about building stability, resilience, and security into their CBDC ecosystem. The G7 principles, for example, provide a starting point for addressing those core policy issues.
Central banks also need to be thinking about the end user and how to integrate CBDC with existing systems and infrastructure. These are challenges that would be very costly and technically challenging for central banks to address on their own. To best tackle, we believe that public-private partnerships and a strong focus on the end user experience will be vital.
SA: Yes, it’s likely that a “two-tier system,” involving both central banks and traditional financial players, is what will emerge. In our work with central banks, we’ve seen strong interest in receiving expertise and support from the private sector. They are interested in piloting concrete use cases that will significantly benefit the efficiency and resources required to transfer assets and reconcile accounts.
So how can Central Banks tackle the adoption challenge and motivate people and businesses to use CBDC?
CG: We think it’s important for central banks to think about CBDC as a product. Consumers want to manage and spend their money with a seamless, intuitive and familiar experience — whether that’s tapping to pay, splitting the bill with a click, or having account management tools at your fingertips via a mobile banking app. How do you meet those user-centric, digital-first expectations with CBDC? In our view, it’s important that CBDC can be easily accepted everywhere, by businesses and retailers from day one, through connecting to the existing payment infrastructure. This will also help pave the future for developers, fintechs and financial institutions with deep product-development expertise, to build on top of CBDC networks.
What does Visa’s CBDC Payments module do? How does it address this challenge?
CG: Visa’s CBDC Payments Module is designed to provide an on-ramp for CBDC to existing payment networks, so that CBDC networks can easily connect to traditional financial service providers. For banks and issuers processors, they’ll be able to plug into the module and integrate their existing infrastructure and be enabled to do things like issue CBDC-linked payment cards or wallet credentials for consumers to use. We’re in the process of integrating our module with the ConsenSys Codefi CBDC sandbox powered by ConsenSys Quorum, so that our platform can be ready to tap into enterprise blockchain technology.”
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
