By John Morris, updated March 24, 2025
As governments push toward Central Bank Digital Currencies (CBDCs), over 130 countries are actively researching or developing digital currencies. According to a 2024 Bank for International Settlements (BIS) report, these CBDCs represent 98% of global GDP in ongoing discussions.
Ripple, the company behind the XRP Ledger (XRPL), has partnered with central banks to explore blockchain-based CBDC solutions. However, while Ripple’s CBDC platform operates on XRPL, it does not require the use of XRP itself. Still, XRP remains a potential settlement layer for cross-border CBDC transactions due to its speed, low cost and interoperability.
The Growing Need for CBDC Interoperability
Unlike CDACC, CBDCs are primarily intended for national circulation, but there is a very serious central bank problem with international payments. The current means of payment, the SWIFT system, takes several days for payments to be set on a gravely expensive settlement system.
XRP’s infrastructure offers an alternative:
- Almost instant transaction completion (3-5 seconds).
- XRP dramatically reduces banking costs by eliminating the need for intermediary banks.
- Exchanging CBDCs smoothly and tenant efficiency in foreign exchange.
By serving as a neutral bridge currency, XRP has the potential to assist central banks with the international integration of their digital currencies without losing control of regulation.
XRP’s Involvement in CBDC Pilots
1. Palau’s CBDC Pilot
In 2022, the government of Palau joined forces with Ripple to pilot a stablecoin-backed central bank digital currency (CBDC) on XRPL and this project seeks to enhance digital payments as well as broaden financial inclusion.
2. Bhutan’s Digital Ngultrum
To strengthen the economy’s digitization, the Royal Monetary Authority (RMA) of Bhutan also undertook a CBDC pilot program using XRP Ledger.
3. Georgia’s Digital Lari (GEL)
In 2023, Georgia’s central bank, Ripple, was their CBDC technology partner, which was an important milestone towards Eastern Europe’s digital currency development.
4. Ripple’s Role in the Digital Euro
As a member of the Digital Euro Association, Ripple works with the DEA in what seems to be positioning Ripple as the potential backbone for a future European CBDC.
These aids in real-world scenarios show a growing trust in the capabilities of XRP to drive digital financial systems.
Why XRP is Well-Suited for CBDC Development
XRP has an upper hand over Bitcoin and Ethereum since it employs a low energy consumption consensus ledger rather than mining and some of its benefits are:
- Scalability: XRP Ledger can handle 1,500 transactions per second (TPS). In comparison, Bitcoin only achieves 7 TPS.
- Efficiency: It costs less than a cent to perform transactions on XRPL.
- Interoperability: XRP’s ledger is perfect for cross-border settlements because it allows for CBDC to CBDC-transfers.
XRP is currently experimenting with a solution that could aid in the cross-border operations of CBDCs, which require a singular system to function seamlessly across various borders.
Opportunities and Challenges in Regulations
XRP’s Challenges
- Regulatory Confusion in the United States: The legal dispute between the SEC and Ripple has created confusion for XRP’s integration into America’s financial markets, which is causing a delay in adoption.
- Central Banks’ Leaning Towards Private Blockchains: A few states prefer the usage of permissioned blockchain systems over public ones.
- Other Networks Competition: XRP is now under threat from other challengers like Stellar, Hedera and Ethereum, who are also looking at the adoption of CBDCs.
XRP’s Opportunities in Regulation
- EU’s MiCA Regulation: The MiCA framework leads to the legal paradox defining markets of crypto assets, so XRP has a better possibility of being integrated into Europe’s CBDC projects.
- Pro-Crypto Policies in Asia: XRP stands a better chance in the countries of Japan, Singapore and South Korea, which are more open in terms of cryptocurrency policies.
- Ripple’s License in Singapore: The approval of Ripple by the Monetary Authority of Singapore (MAS) enables Ripple to use its services in cryptocurrencies, cementing its presence in regulated financial markets.
XRP’s position will be settled over how central banks will use it in CBDC payment schemes.
What’s Next for XRP and CBDCs?
With today’s push towards the digitization of money, XRP has some specific USD CBDC-related opportunities, as mentioned below:
- Scaling Existing CBDC Pilots: If the Palau, Bhutan and Georgia projects succeed, more countries may experiment with XRP settlement systems.
- Finalized Global CBDC Regulations: XRP’s participation in interbank trades and liquidity provisioning will be well-defined as nations formulate policies.
- Institutional Growth: Ripple’s incursions into traditional finance are evidenced by the latest acquisition, a $250 million purchase of crypto custody firm Metaco.
If XRP maintains the same degree of reliability, security and compliance, it may soon be designated as a key infrastructure provider for global CBDC networks.
Conclusion
Ripple is transforming the world with XRP and how XRP adapts to CBDCs is also becoming a critical part of the puzzle. Knowing that speedy and cost-effective blockchain infrastructure exists, it is unsurprising that XRP is already being tested by several central banks for real-world partnerships.
While there are still ‘ifs,’ such as regulation or rivalry, Ripple’s growth, particularly in expanding their CBDC pilot programs and collaborations with financial institutions, exploits the market position and it seems reasonable to foresee that XRP will have an important impact on what next-generation currencies will look like.
XRP’s future hinges upon its capability of bridging the traditional banking system powered by these emerging governments with the blockchain ecosystem. Such attributes make it a frontrunner in the field of digital finance.
