Ripple CEO, Brad Garlinghouse, has pointed out that interoperability between CBDCs will be pivotal to the digitization of fiat currencies
Without interoperability, they are building the same ‘siloed systems’ without communication bridges
RippleNet and XRP can bridge this gap of interoperability
The CEO of Ripple, Brad Garlinghouse, has stressed the need for interoperability in the development of the various Central Bank Digital Currencies being explored by the multiple global central banks. According to Mr. Garlinghouse, a lack of these CBDCs to operate seamlessly with each other would be making the same mistakes that have crippled the software industry where one system cannot freely communicate with another.
Mr. Garlinghouse shared his insights via twitter and was responding to a recently published article by the team at Ripple stressing the importance of interoperability in any payment system. Below is his Tweet urging interoperability between Central Bank Digital Currencies.
Over 70% of the central banks around the world are looking at deploying #CBDCs – and one thing that's crystal clear is the importance of interoperability. If you’re not prioritizing this, you’re just rebuilding the same siloed system. https://t.co/AZdS5YBU8K
One key takeaway from the article from Ripple stressing interoperability is that most central banks are focusing primarily on domestic use cases of CBDCs such as the distribution of stimulus checks to cushion citizens from the economic effects of COVID19. However, their focus should go beyond domestic use and factor in that we now live in an interconnected global economy.
While focusing on domestic use cases is understandable for individual countries, we live in an increasingly interconnected global economy. It will be critical to bridge the gaps between the various CBDC initiatives with existing payment systems as well as other digital currencies to ensure they are successful on a global scale.
The key is that each system must contain core functionality that enables it to operate seamlessly with other payment systems. Ripple believes in leveraging open protocols and standards, developed in partnership with private stakeholders such as payment service providers, financial institutions and fintech companies, to achieve interoperability
RippleNet Can Be Used to Bridge that Gap
In terms of providing solutions for bridging the communication gaps between global CBDCs, the team at Ripple pointed out that RippleNet can provide a solution.
Ripple’s global payments network, RippleNet, is built on open, interoperable protocols designed to enable value transfer across multiple networks by defining how simple functions, provided by individual networks, should work together. Ensuring this level of interoperability creates a network-of-networks that significantly boosts the utility of each CBDC.
XRP Can Support the Exchange of CBDCs
Furthermore, XRP can be used to bridge two CBDCs in a matter of seconds and within RippleNet.
RippleNet’s On-Demand Liquidity service allows financial institutions to transact in real-time across multiple global markets using the digital asset XRP and such a solution can also support the direct exchange of CBDCs.
XRP is faster, less costly and more scalable than any other digital asset, making it the ideal instrument in bridging two different currencies quickly and efficiently.
Using a neutral and efficient digital asset like XRP also reduces the hegemonic influences of the most powerful nations and helps level the playing field in the international trade’s payment system.