Mastercard Launches A New Testing Platform for Central Banks to Launch CBDCs

The development of central bank digital currencies (CBDCs) has gained momentum as central banking institutions have started experimenting with fiat-pegged national digital currencies for their respective economies.

On Wednesday, September 9, payments giant Mastercard unveiled a new CBDC virtual and custom testing platform for central banks to simulate and evaluate a CBDC ecosystem.

Basically, the platform aims at providing a virtual testing environment for central banks to evaluate their CBCD performance. It also tries to give an overview of the issuance, distribution and exchange of CBDCs among different stakeholders like commercial banks, financial institutions, and even consumers.

The Mastercard CBDC testing platform makes sure that it is interoperable with the existing payments rails widely used by individuals and businesses. To access the CBDC tech design Mastercard has also invited other “commercial banks and tech and advisory firms” in addition to central banks.

Raj Dhamodharan, Executive Vice President, Digital Asset and Blockchain Products and Partnerships, Mastercard, said: “Central banks have accelerated their exploration of digital currencies with a variety of objectives, from fostering financial inclusion to modernizing the payments ecosystem. Mastercard is driving innovation with the public sector, banks, fintechs, and advisory firms in the exploration of CBDCs, working with partners that are aligned to our core values and principles. This new platform supports central banks as they make decisions now and in the future about the path forward for local and regional economies”.

The Mastercard CBDC testing platform offers enough flexibility to central banks while emulating their CBDCs. The virtual testing platform is ready to explore if the CBDC fits in the native financial system of a particular region or country while understanding its economic challenges. Thus, the platform can be customized to the environment in which it operates.

Recently, a number of big financial institutions have supported the developments of digital currencies. The IMF has also stressed the need for a coordinated approach among top global economies to have a seamless payments ecosystem for instant and low-cost cross-border payments.

As per the report by Bank of International Settlements (BIS), nearly 80 percent of the central banks surveyed have kickstarted their CBDC developments. Of this, 40 percent of them have already proceeded from the conceptual stage to design.

In the official announcement, Mastercard wrote: It “is committed to supporting central banks in their chosen path to modernize payments as they look for solutions that seamlessly integrate with existing ways to pay. The company is committed to forging partnerships between public and private sectors to together transform the way people and businesses transact”.