Mastercard has successfully completed a trial with the Reserve Bank of Australia (RBA), exploring the wrapping of central bank digital currencies (CBDCs) on various blockchains.
This method, similar to wrapped Bitcoin and Ether, allows for the integration of a pilot CBDC within the Ethereum blockchain. The trial involved the RBA’s pilot CBDC platform, Mintable, and Cuscal, and was conducted in a live environment, demonstrating the ability to purchase a nonfungible token (NFT) listed on Ethereum.
In this process, a specific amount of CBDC on the RBA’s platform was “locked,” and an equivalent amount of wrapped CBDC tokens was minted on Ethereum. The Ethereum wallets of both the buyer and seller, along with the NFT marketplace smart contract, were on an “allow list,” highlighting the platform’s capability to implement controls, even on public blockchains.
The solution leverages Mastercard’s Multi Token Network, introduced in June 2023, which integrates payment technology with blockchains. This network includes the Mastercard Crypto Credential, establishing common verification standards for secure interactions on blockchain networks, and interoperability, allowing capabilities across supported payment tokens and networks in a scalable manner.
Richard Wormald, Division President, Australasia at Mastercard, emphasised the potential of this technology in the maturing digital economy. He stated, “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.”
Zack Burcks, CEO and Founder of Mintable, highlighted the collaboration’s potential, stating, “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.”
The trial aligns with the RBA’s exploration of an Australian dollar CBDC, which could revolutionize complex payment arrangements and foster innovation in the finance sector. However, the central bank acknowledges the need for further research to evaluate the benefits fully.
Mastercard’s CBDC ambitions have been ongoing, with the company expressing interest in exploring CBDCs since 2020. The recent trial aligns with Mastercard’s strategy to expand blockchain technology across various payments use cases. The company aims to enable regulated entities to leverage digital assets’ functionality and is piloting the Multi Token Network with select financial institutions globally.
Nathan Churchward, Domain Lead, Payments at Cuscal, expressed excitement about collaborating with Mastercard in testing new approaches for managing settlement and liquidity risk through the CBDC pilot. The RBA’s CBDC pilot project with the DFCRC explores potential use cases for a CBDC in Australia, involving the issuance of a limited-scale “pilot” CBDC for demonstrating innovative payment and settlement services.
Australia’s central bank has actively explored CBDC benefits, conducting trials to identify improvements in payments, stimulate innovation, support financial markets, and enhance inclusivity in the digital economy. While acknowledging the potential advantages of a CBDC, the RBA concludes that further research is necessary to fully understand its impact on the Australian payments ecosystem.