Mastercard has recently announced a successful demonstration of their innovative solution that allows Central Bank Digital Currencies (CBDCs) to be used on various blockchain networks. This solution was developed from a joint research project with the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC). The main goal of this project is to explore potential applications of a CBDC in Australia.
The pilot CBDC had been subjected to specific regulation, such as Know Your Customer (KYC) verification and risk assessment by licensed service providers, providing users with enhanced security when conducting transactions across blockchains. To demonstrate the program, Mastercard set up a live environment to show how the pilot CBDC could be used to purchase Non-Fungible Tokens (NFTs) listed on the Ethereum public blockchain.
The project was based on the Multi Token Network introduced by Mastercard in June 2023. It consists of the Mastercard Crypto Credential, a system that sets common verification standards and infrastructure for secure interactions on blockchain networks, and provides interoperability, allowing the use of different payment tokens and networks in a scalable way.
The process of buying an NFT required the locking of the required amount of pilot CBDC on the RBA’s CBDC platform, followed by the generation of an equivalent amount of wrapped pilot CBDC tokens on the Ethereum network. The transaction also necessitated the Ethereum wallets of both the buyer and seller, as well as the NFT marketplace smart contract.
Zack Burcks, CEO and founder of Mintable, commented on the collaboration, saying:
“In collaboration with Mastercard, we’ve pinpointed a scenario in which digital currencies and NFTs can seamlessly integrate, possibly eradicating fraud and theft, eliminating the risk of losing documentation and records, and unlocking fresh opportunities for commerce.”
Australia’s central bank has been exploring the potential benefits of CBDCs for the nation. A 44-page report from the bank and the DFCRC revealed their conclusions from the pilot program. It identified four key areas where a CBDC could bring about improvements, including more intricate payment arrangements, stimulation of the private digital currency sector, support for financial innovation in debt securities markets, and improved inclusivity and resilience.
The report also presented various proposals from the 16 companies involved in the pilot program, emphasizing the potential benefits of a CBDC in enabling “atomic settlements”, as well as its programmability which could enhance efficiency and reduce risk in complex business processes. Further research is still necessary to determine the full potential of the CBDC, but its implementation could improve the efficiency and resilience of the Australian payments ecosystem.
