The Digital Dollar Project Completes Successful Pilot Study on Remittance Payments
(Originally posted on : Crypto News – iGaming.org )
A promising pilot project investigating the usage of a simulated retail central bank digital currency (rCBDC) for remittance payments to the Philippines was recently completed by The Digital Dollar Project (DDP). The study, which was carried out in cooperation with Western Union and BDO Unibank, showed how CBDCs might be used to expedite and modernize the remittance process. This article explores the methodology, main conclusions, and ramifications of the pilot research for future cross-border transactions.
Using the Champion Model for Simulated CBDC Transactions
The Champion Model, a replicated CBDC issued by a central bank and utilized for remittances, was used in the DDP’s pilot project. A bank acting as an intermediary was given CBDCs in order to give Western Union (WU) access to send money to a BDO Unibank customer in the Philippines. WU used a decentralized exchange (DEX) to swap dollars of CBDC for Philippine pesos at a rate set in real time by an outside oracle. In contrast to the usual practice of utilizing money from commercial banks, the transaction used money from the central bank throughout.
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Advantages of the Decentralized Exchange (DEX)
The study’s use of the DEX was one of its main strengths. The creation of such an exchange may promote rivalry and raise transparency within the remittance sector. The majority of remittances to the Philippines, however, take place after trade is suspended in Manila, and the research acknowledged the difficulty of time zone disparities.
The use of distributed ledger technology was acknowledged to assist safeguard privacy by offering fine-grained control over customer data sharing, even if the study did not directly address privacy problems. As CBDCs gain popularity, this functionality could become essential for guaranteeing data security and user confidence.
Simultaneous Transfer of Message and Value
The simultaneous transmission of currency and communications was made possible by distributed ledger technology, and it only took a few seconds to complete. Contrarily, the current state of technology frequently results in value transfers taking longer than message transfers, which increases the risk of counterparties and credit. According to the study’s findings, CBDCs have the ability to improve efficiency for private sector businesses and their clients without competing with established players like Western Union and BDO Unibank.
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The Significance of Remittances
The global economy will depend heavily on remittances, which will be worth $626 billion in 2022 and $74 billion from the United States in 2021. 7% of American families participate in remittance operations. Remittances, which are typically priced at $200 to $300 each transaction, can have substantial fees, with bank transfers costing, on average, 7.98%. The simulated CBDC procedure promises to promote transparency while saving time and money.