The Royal Monetary Authority of Bhutan partnered with Ripple to carry out tests of a digital currency from the mountain kingdom’s central bank.
In an announcement made Wednesday, Ripple Labs said that Bhutan’s central bank will leverage the company’s private ledger to issue and manage a digital ngultrum. According to Ripple, the move was motivated by the effort of the Royal Monetary Authority, or RMA, to improve cross-border payments, expand financial inclusion for its residents, and “Expand its commitment to sustainability as the only carbon negative country in the world.”
With a population of about 800,000, Bhutan’s gross domestic product amounted to $ 2.5 billion in 2020. Although many media outlets report on the “gross national happiness” the country as an alternative to traditional finance, thousands of Bhutanese citizens do not have access to a savings account or a credit card. The RMA said it plans to increase financial inclusion in the country by 85% by 2023 by making payments with a central bank digital currency, or CBDC, “easier, faster and more affordable”.
“Beyond privacy, the CBDC solution is also tailored to handle payments with the volume of transactions that a successful retail CBDC requires.” Ripple said. “This provides central banks like the RMA with the security, control and flexibility they need to deploy a CBDC without compromising financial stability or monetary policy objectives.”
The announcement comes more than six months after Ripple said it would test a private version of the XRP Ledger to offer central banks a solution to launch a CBDC. Bhutan is one of the first countries to benefit from this service.
Other CBDC pilot projects around the world continue, with Indian officials hinting that they will start rolling out a digital rupee in December, and Nigeria’s central bank planning to launch a digital currency by 2022. Nevertheless, China appears to be in the lead as it began testing its digital yuan in April 2020.