Mastercard has announced a successful demonstration of an innovative solution that enables the wrapping of Central Bank Digital Currencies (CBDCs) on various blockchain networks. This solution emerged from a collaboration between Mastercard, Cuscal, and Mintable as part of a research project conducted with the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC).
Exploring Potential Applications of CBDC
The primary objective of this initiative, according to Mastercard, is to explore potential applications of a CBDC in Australia. The collaboration incorporated stringent controls to ensure that the pilot CBDC could only be owned, utilized, and redeemed by authorized entities who had undergone Know Your Customer (KYC) verification and risk assessment by licensed service providers. This will give consumers enhanced security and simplicity when engaging in transactions across various blockchains.
Mastercard showcased the program’s demonstration in a live environment, offering insight into how it enables holders of a pilot CBDC to purchase a Non-Fungible Token (NFT) listed on the Ethereum public blockchain. The process involved locking the required amount of pilot CBDC on the RBA’s CBDC platform and generating an equivalent amount of wrapped pilot CBDC tokens on the Ethereum network.
Mastercard Multi Token Network
Furthermore, this pilot program leveraged two fundamental aspects of the Multi Token Network introduced by Mastercard in June 2023. This network provided a framework for more efficient payment and commerce applications using blockchain technology. This includes Mastercard Crypto Credential, a system that establishes common verification standards and infrastructure for secure interactions on blockchain networks. Additionally, it offered interoperability, enabling the use of capabilities across multiple supported payment tokens and networks in a scalable manner.
Mastercard further emphasized that a critical requirement for this test transaction was the Ethereum wallets of both the buyer and seller, as well as the NFT marketplace smart contract.
“Australia’s central bank has been actively exploring the potential benefits of CBDCs for the nation.”
Zack Burcks, CEO and founder of Mintable
CBDC Benefits and Proposals
Australia’s Reserve Bank had previously completed a trial of its own CBDC. The pilot program identified four key areas where a CBDC could bring about improvements:
- Facilitating “smarter” payments by enabling more intricate payment arrangements not supported by existing systems.
- Stimulating innovation within the expanding private digital currency sector.
- Supporting financial innovation in debt securities markets.
- Improving inclusivity and resilience in the broader digital economy.
The report also outlined various proposals from the 16 participating companies, emphasizing the potential benefits of a CBDC in enabling “atomic settlements” – a simultaneous and instantaneous transaction settlement. Additionally, CBDC’s programmability was noted as a potential enhancement that could improve efficiency and reduce risk in various complex business processes. However, further research is necessary to fully explore the potential advantages of a CBDC, although its implementation could enhance efficiency and resilience in specific aspects of the Australian payments ecosystem.
“Even though its implementation could enhance efficiency and resilience in specific aspects of the Australian payments ecosystem.”
44-page report from the Reserve Bank of Australia and the Digital Finance Cooperative Research Centre
