Central bank digital currencies (CBDCs) are showcased as potential solutions for various inherent issues with traditional fiat money. The prominent ones among these are easing cross-border payments and making financial inclusion smooth. Vice president of central bank engagement at Ripple, James Wallis, holds similar views on CBDCs resolving financial inclusion issues.
Wallis graced the recent video posted on Ripple’s official YouTube channel on November 18, 2023. In a series of “Crypto in One Minute” videos, the recent one featured how CBDCs can support financial inclusion around the world. In the video, Wallis explained what financial inclusion means, who remains deprived of it, and how the issue can be resolved.
According to a Ripple executive, the lack of financial inclusion keeps people away from using even basic financial services. These services could include borrowing money and even making basic payments.
Wallis highlighted the issues behind people being distant from financial services.
These people primarily belong to a very low-income class. The income sometimes could be so low that it might not even make sense to keep the money in the bank. However, this also keeps them away from making any relations with the banks since they hold no financial or credit history.
Another reason behind what Wallis mentioned is the commercial banks in the regions that do not allow people from such a low-income tier. These commercial banks have shareholders and hence the responsibility to generate revenue is not possible with a low-income grade class.
The issue of financial inclusion is spread across the globe be it the United States, Asian countries, or African countries.
The fintech advisor suggested that central bank digital currencies (CBDCs) can fix the issue. He explained that digital currencies operate at a very “low cost” so they can allow financial services at a much lower cost relative to traditional ways.
CBDCs can allow people to make simple transactions and these payments will help them create credit history. Based on their credit history, these people can then borrow money for various purposes be it business growth or any personal use.
Hence, Wallace suggested that CBDCs can solve the years-long issue of financial inclusion.
Ripple Leads in CBDCs Infrastructure Development
The blockchain-based payment protocol company, Ripple, continues to grow the customer portfolio in CBDC development. The company is working with over 20 countries for their CBDC projects. Countries like Bhutan, Montenegro, Palau, Hong Kong, and Colombia are among those who partnered with the company to develop digital currency infrastructure.
Ripple’s partnership with these developing nations came amidst the company’s ongoing tussle with the U.S. financial regulator Securities and Exchange Commission (SEC). Until the last update, the U.S. court judge ruled in favor of Ripple and XRP stating that the digital asset is not a security. However, the final judgment is yet to take place and the SEC has a chance to appeal the decision until then.
The broader crypto community has already considered Ripple has won the lawsuit. But there are still people out there who do not agree with it, rather, think that Ripple lost the case against SEC.