Colombia’s Central Bank Taps Ripple to Pilot CBDC

Ripple is continuing its expansion into Latin America. 

The software company founded by the creators of the cryptocurrency XRP today announced it has signed a deal with Colombia’s central bank to explore central bank digital currency (CBDC) technology. 

Ripple said in its announcement that the Central Bank of Colombia and Ministry for the Information and Communications Technologies (MinTIC) would use Ripple’s CBDC platform to “pilot use cases that will enhance Colombia’s high-value payment system.” 

Ripple’s CBDC platform uses XRPL—a public blockchain. 

The announcement did not say that Colombia is planning to launch a CBDC but James Wallis, vice president of Central Bank Engagements and CBDCs at Ripple, added that the pilot would “pave the way for transformative advancements in the utilization of blockchain technology within the public sector.”

A CBDC is a digital version of a state’s fiat currency—like the U.S. dollar or the euro—backed by a central bank. CBDCs are digital assets, but are different from the likes of Bitcoin or Ethereum because they are controlled by a single, centralized entity. 

Different countries around the world are in different stages of researching and releasing CBDCs. 

The director of Colombia’s tax and customs agency last year said that the Andean nation was exploring a CBDC. 

This isn’t the first time Colombia has found Ripple useful: Colombia’s government last year launched an initiative with Ripple Labs as part of a plan to rectify land distribution efforts. 

The project, built by blockchain development company Peersyst Technology and Ripple, is working to permanently store and authenticate property titles on Ripple’s public blockchain in a bid to eliminate bureaucracy and make land distribution more equal in one of the world’s most unequal countries. 

Ripple was launched to help banks and other financial institutions move money fast and without fees. Its founders launched a cryptocurrency, XRP, which is now the sixth largest digital asset with a market cap of $24.6 billion. 

In December 2020, the U.S. Securities and Exchange Commission hit Ripple with a $1.3 billion lawsuit, alleging that the company misled investors and sold unregistered securities in the form of XRP tokens. 

The lawsuit is ongoing and earlier this week, Ripple successfully got a court to release emails related to a much-publicized speech from ex-SEC Director William Hinman in which he claimed Ethereum and Bitcoin were not securities. Those behind Ripple claimed the emails would swing the lawsuit in Ripple’s favor because they claim they show that the regulator has not been consistent with regard to its stance on cryptocurrencies. 

Despite XRP initially jumping on the news, experts have expressed doubts that the emails will help Ripple. 

Colombia is Latin America’s fifth-largest economy and has one of the largest crypto markets in the region, according to blockchain data firm Chainalysis.