Mastercard introduces Central Bank Digital Currencies (CBDCs) testing platform

By Pavithra R

Mastercard announced the launch of a proprietary virtual testing environment for central banks to evaluate Central Bank Digital Currencies (CBDCs) use cases. 

CBDCs are designed to be of equivalent value with the nation’s paper currency and subject to the same government-backed guarantees. Besides rather than printing money, central banks can issue CBDCs as a digital representation of a country’s fiat currency. The new platform enables the simulation of issuance, distribution, and exchange of CBDCs between banks, financial service providers, and consumers.

With the global economy racing to embrace digital payments, central banks are looking to the future and investigating ways to support innovation while maintaining monetary policy and financial stability as they issue and distribute currency. Mastercard has invited Central banks, commercial banks, and tech & advisory firms to partner with them so as to assess CBDC tech designs, validate use cases, evaluate the suitability of CBDCs in a country or region and evaluate interoperability with existing payment rails available for consumers and businesses.

Mastercard is operating with multiple payment rails and convening partners to ensure a level playing field for everyone to bring the most people possible into the digital economy. The firm wants to harness its expertise to enable the practical, safe, and secure development of digital currencies.

“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,” said Raj Dhamodharan, Executive Vice President, Digital Asset, and Blockchain Products and Partnerships, Mastercard.

The virtual platform can be individually customized to the environment in which the central bank operates, allowing them to:

• Simulate a CBDC issuance, distribution, and exchange ecosystem with banks and consumers, including how a CBDC can interface with existing payment networks and infrastructures,
• Evaluate CBDC development efforts, including the security, technical build, and early testing of the design and operations.
• Examine various CBDC technology designs and use cases to determine value and feasibility in the market.
• Demonstrate how a CBDC can be used by a consumer to pay for goods and services wherever Mastercard is accepted.

“Collaborations between the public and private sectors in the exploration of Central Bank Digital Currencies can help central banks better understand the range of technology possibilities and capabilities available with respect to CBDCs. Central banks can benefit from support in exploring the option set available to them with respect to CBDCs, as well as gaining insight into what opportunities may be forthcoming,” said Sheila Warren, Head of Blockchain, Digital Assets and Data Policy at the World Economic Forum.

Recently, VIPKid teamed up with Mastercard to offer a new payment option for teachers.

Established since 1966, Mastercard is a global technology company in the payments industry. The firm is committed to building a more inclusive digital economy that works for everyone. The firm is also making Environmental, Social, and Governance (ESG) central to its business model.