Mastercard tests tokenization of CBDCs on blockchains
Mastercard, a global leader in digital payments, has unveiled a groundbreaking solution that showcases the future of Central Bank Digital Currencies (CBDCs). In collaboration with Cuscal and Mintable, Mastercard has successfully demonstrated the tokenization, or "wrapping," of CBDCs on different blockchain networks. This development opens up new avenues for consumers to engage in commerce across various blockchains with enhanced security and convenience.
The initiative, undertaken as part of a research project in partnership with the Reserve Bank of Australia (RBA) and the Digital Finance Cooperative Research Centre (DFCRC), aims to explore potential use cases for a CBDC in Australia. It introduces robust controls to ensure that the pilot CBDC remains accessible and usable only by authorized parties who have undergone Know Your Customer (KYC) verification and risk assessment conducted by licensed service providers.
Richard Wormald, Division President, Australasia at Mastercard, expressed the significance of this technology in response to the evolving digital economy. "As the digital economy continues to mature, Mastercard has seen demand from consumers to participate in commerce across multiple blockchains, including public blockchains," he noted. "This technology not only has the potential to drive more consumer choice, but it also unlocks new opportunities for collaboration between the public and private networks to drive genuine impact in the digital currency space."
The live demonstration showcased the solution's practical application. It enabled the holder of a pilot CBDC to purchase a Non-Fungible Token (NFT) listed on the Ethereum public blockchain. The process involved "locking" the required amount of a pilot CBDC on the RBA's pilot CBDC platform and generating an equivalent amount of wrapped pilot CBDC tokens on the Ethereum blockchain.
A critical aspect of this test transaction was the need for Ethereum wallets of both the buyer and seller, as well as the NFT marketplace smart contract, to be "allow-listed" within the platform. This demonstrated the platform's ability to implement controls, even on public blockchains, ensuring the security and integrity of the transaction.
This pioneering pilot leveraged two pillars of the Multi Token Network, introduced by Mastercard in June 2023. The Multi Token Network offers foundational capabilities that enhance the efficiency of payment and commerce applications using blockchain technology. It includes the Mastercard Crypto Credential, which provides common verification standards and infrastructure for trusted interactions on blockchain networks, as well as interoperability for seamless operations across supported payment tokens and networks.
Currently in beta, Mastercard's Multi-Token Network plays a pivotal role in the company's broader strategy to expand blockchain technology's usage in various payment scenarios. It is being piloted with select financial institutions worldwide, promising to enable new levels of interoperability between blockchains in a secure manner.
Zack Burks, CEO and Founder of Mintable, a participant in Mastercard's Start Path development program, highlighted the potential of NFTs in this innovative CBDC pilot. "The vast potential of NFTs was obvious during this progressive CBDC pilot," he said. "Together with Mastercard, we have identified a use case whereby digital currencies and NFTs can easily be linked, potentially stamping out fraud and theft, ending the loss of documentation and records, and unleashing new possibilities for commerce."
Nathan Churchward, Domain Lead, Payments at Cuscal, expressed satisfaction with the collaboration, stating, "We were pleased to collaborate with Mastercard to test new approaches to managing settlement and liquidity risk through the CBDC pilot. It's exciting to be able to further partner with Mastercard to support the future of banking and payments in Australia."
The RBA's CBDC pilot project with the DFCRC aimed to explore the potential use cases of CBDCs in Australia. It involved issuing a limited-scale 'pilot' CBDC that held real legal claim status with the RBA. Industry participants utilized this pilot CBDC to demonstrate how it could provide innovative payment and settlement services to Australian households and businesses.
Mastercard's involvement in this project underscores its commitment to advancing digital currencies and blockchain technology, offering consumers new possibilities in the evolving landscape of digital commerce.