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A successful pilot project conducted by the Digital Dollar Project in partnership with Western Union has revealed a range of potential benefits in using Central Bank Digital Currencies (CBDCs) for cross-border remittances.
Conceived by former CFTC chair Chris Giancarlo, ex-CFTC chief innovation officer Daniel Gorfine, and Pure Storage CEO Charles Giancarlo, the Digital Dollar Project is a nonprofit initiative aimed at promoting research and public discourse on CBDCs.
The recent pilot involved collaboration with Western Union, BDO Unibank in the Philippines, and Accenture. The project focused on designing and configuring a platform using Distributed Ledger Technology (DLT) to simulate the required payments infrastructure for transferring digital dollars to Philippine pesos.
The outcomes of the pilot indicate several advantages, including decreased counterparty and credit risk due to instantaneous settlement. Furthermore, CBDC settlement facilitates the transfer of both value and message within a single atomic transaction, thereby reducing the need for capital to be held in pre-funded accounts.
Additionally, a digital dollar enhances the accessibility and portability of money in digital form, benefiting the unbanked and underbanked populations. Verified digital wallets can mitigate fraud, expedite settlement, streamline jurisdictional requirements, and reduce the occurrence of failed transactions.
Kevin Mole, Global Head of Digital Assets at Western Union, comments, “Through this pilot study, Western Union has identified several advantages for customers and financial institutions, laying the groundwork for ongoing evaluations of the feasibility and viability of utilizing retail CBDCs for cross-border remittances.”
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