MasterCard on Wednesday announced the release of a proprietary tool for central banks that want to test their Central Bank Digital Currency, or CBDC.

A report by the Bank for International Settlements noted that more than 70 percent of central banks are considering the idea of issuing digital currency in some form. While few have gotten into actual concepts and experiments, the tools released by MasterCard aim to make testing simpler.

The tool simulates various types of trading environments and allows central banks to evaluate CBDC use cases. It simulates the issuance, distribution and exchange of CBDCs between banks, financial services firms and consumers.

MasterCard is calling on partners to use the platform to evaluate the effectiveness of the CBDC’s technical design, proposed use cases, and interoperability with existing payment methods.

Intriguingly, one of the possibilities of the virtual sandbox is to show “how consumers can use CBDC to pay for goods and services anywhere in the world where MasterCard is accepted”.

The CBDC will enable a direct bridge between central banks and consumers, avoiding the need to distribute and collect funds through commercial banks. However, some designs focus only on the transfer of funds from institutions. MasterCard’s platform appears to be geared toward both.

Mastercard can often be seen participating in various types of distributed ledger technology, including an initial commitment to the Libra Alliance in 2019. Later that year, the company left the association, citing mainly regulatory resistance as its motivation.

MasterCard’s CEO has also been somewhat critical of CBDCs because of the isolated nature of their proposals. One of the goals of the tool may indeed be to demonstrate the benefits of interoperability to the CBDC, which may ensure MasterCard’s continued relevance in the payments development process.

MasterCard’s research and development often involves blockchain or DLT, while its cards division, along with its main competitor Visa, is increasingly keen on encryption-based cards.

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2020-09-09