Mastercard Launches CBDC Testing Platform

The increasing interest in Central Bank Digital Currency (CBDC) has prompted one of the largest payments companies, Mastercard, to release a virtual testing environment for such digital assets, the firm said in a press release on 9 September.

According to the announcement, the new tool is meant to support the efforts of central banks in creating their own digital currencies, by presenting them with a testing environment that mimics the issuance, distribution and exchange of CBDCs between financial institutions and consumers. The payments giant has called on central banks, as well as commercial banks and advisory firms, to make use of the platform to evaluate the effectiveness of their CBDC’s design, proposed use cases and interoperability with existing payment methods.

Mastercard has also noted that there is an increased interest in CBDCs, pointing to a survey conducted by the Bank of International Settlements, which shows that 80% of central banks are already entertaining the idea of a national digital currency. The survey also noted that around 40% of central banks have already moved from conceptual research, and are now experimenting with the concept and design of their digital asset.

Raj Dhamodharan, EVP, digital asset and blockchain products and partnerships at MasterCard, said in a statement:

“Central banks have accelerated their exploration of digital currencies with a variety of objectives, from fostering financial inclusion to modernizing the payments ecosystem. This new platform supports central banks as they make decisions now and in the future about the path forward for local and regional economies.”

Some banks are focusing more on designing a digital currency that will be used for institutional money transfers, while others aim to create a CBDC to bridge the gap between consumers and central banks, allowing them to avoid going through commercial banks for distributing and collecting money. While each bank has its own vision, Mastercard’s platform seems to be geared towards both approaches. It might even be used to show how a CBDC can be used to pay for goods and services anywhere Mastercard is accepted.

As of late, Mastercard has been focusing more and more on various types of Distributed Ledger Technology (DLT). Last year, the firm had plans to join Facebook’s Libra project as well, though later it withdrew from the association, citing regulatory push-back. The firm’s card division has also been warming up to crypto-based initiatives, granting Wirex a principal membership status in July 2020.