White Paper Highlights Benefits of Retail CBDC

In a white paper, the non-profit organization Digital Dollar Project ("DDP"), in collaboration with Western Union and BDO Unibank in the Philippines, concluded that a central bank digital currency ("CBDC"), "rather than displacing the service offerings of established financial institutions providing cross-border remittance services . . . present[s] an opportunity to modernize operational processes and expand financial access."

According to the DDP, a "pilot study" demonstrated that a U.S. CBDC available to retail investors would facilitate fund flows between the United States and the Philippines, which is "one of the busiest corridors globally." In its pilot study, the DDP simulated a U.S. retail CBDC between a customer of a U.S. money transfer operator, Western Union, to a customer of a commercial bank in the Philippines, BDO Unibank.

The DDP found that CBDCs can complete transfers in less than 10 seconds, which reduced counterparty and credit risk for customers and financial institutions. The DDP also found that the instant settlement allows for transferring the CBDC’s value in a single transaction, which can minimize the cost of capital held in pre-funded accounts. The DDP concluded that a verified digital wallet increases portability of CBDCs while reducing fraud, which can also increase access for the unbanked.