Digital Dollar Project: CBDCs Can Help the Unbanked

Could a central bank digital currency (CBDC) help America’s unbanked population?

It appears that way, according to a new report by the Digital Dollar Project (DDP). 

The organization announced Thursday (Aug. 3) it had wrapped a pilot study conducted in collaboration with Western Union, BDO Unibank in the Philippines, and support from Accenture. 

According to a news release, the collaboration is the Digital Dollar Project’s latest private sector effort to support the exploration and experimentation of a CBDC in the United States.

“As conversations around CBDC and a ‘digital dollar’ mature, this cross-border payment pilot is a timely step toward understanding the impact and generating highly applicable data for retail CBDC use cases,” said Jennifer Lassiter, executive director of the Digital Dollar Project. 

“With the support of Western Union and other DDP partners, we will continue to generate the needed research and data to map feasible, real-world use cases that speak to financial institutions, policymakers, and technological partners.”

The release said, “A digital dollar increases the accessibility and portability of money in a digital form to benefit the unbanked and underbanked. 

“A verified digital wallet can help reduce fraud, enable faster settlement, harmonize jurisdictional requirements, and minimize failed transactions.”

In addition, the test found that instant settlement across multiple currencies reduces counterparty and credit risk for people and their financial institutions. And CBDC settlement permits “transferring value and message in a single transaction, settled atomically, thereby reducing the cost of capital held in prefunded accounts.”

The DDP’s pilot follows an announcement last month by the New York Federal Reserve of a test that showed a digital dollar could improve cross-border and domestic payments.

That test — conducted by the Fed’s New York Innovation Center (NYIC) — examined the feasibility of running an interoperable network or central bank and commercial digital currencies on a shared ledger.

“From a central banking perspective, the proof of concept was conducive to exploring tokenized regulated deposits and understanding the potential functional benefits of central bank and commercial bank digital money operating together on a shared ledger,” New York Innovation Center Director Per von Zelowitz said in a news release.