A Deal With The Devil? Montenegro Signs Deal With Ripple To Digitize National Currency

EDITOR'S NOTE: Central bank digital currencies (CBDCs) have been a topic of great interest as more countries explore the potential benefits and risks of implementing digital versions of their national currencies. Montenegro has recently joined this global trend by signing an agreement with Ripple, a prominent blockchain company, to develop a national digital currency. While this collaboration may bring economic growth and innovation to Montenegro, it is crucial to consider the potential risks: the end of privacy, cybersecurity vulnerabilities, financial instability, total government monetary control, and technological failure risks, to name a few.

(Kitco News) - Following up on a deal that was first mentioned in January, the Central Bank of Montenegro (CBGC) has announced that it signed an agreement with Ripple, an enterprise crypto and blockchain solutions provider, to develop a strategy and pilot program for the launch of the country’s first central bank digital currency (CBDC) or stablecoin.

According to a press release shared with Kitco Crypto, the development of a Montenegrin CBDC aligns with the central bank’s core objective of digitizing the country’s financial services to help create greater financial accessibility and inclusion for citizens of Montenegro.

Currently, Montenegro residents primarily transact using the euro, but the country is now looking to establish its own digital currency, joining more than 110 other countries that are currently at some stage of exploration or development of a CBDC, according to data from the Atlantic Council. CBDCs are being explored for a variety of use cases, including widening financial inclusion, modernizing monetary policy, improving payment security and increasing cross-border payments efficiency.

“As a central bank committed to following up-to-date national banking trends, the CBCG is actively ensuring it maintains an efficient financial system,” said Radoje Žugic, Governor of the CBCG. “We look forward to collaborating with Ripple on the pilot project for creating CBDC or stablecoin.

In the partnership with Ripple, the CBCG will work closely with the government of Montenegro and the country’s academia to “create a practical digital currency or secure currency solution to test the main blockchain technology’s functionality and potential.”

The pilot program will analyze the advantages and risks that a CBDC or national stablecoin poses in regard to electronic means of payment availability, security, efficiency, compliance with regulations and the protection of end users’ rights and privacy.

There will be several stages to the project, including one that explores the practical applications of a CBDC or national stablecoin, and another that tests different designs to simulate its circulation and use under controlled conditions.

“The Central Bank of Montenegro is bringing the next level of digital transformation to its financial infrastructure and addressing some of the world’s biggest financial challenges, including financial inclusion,” said James Wallis, Ripple’s Vice President of Central Bank Engagements and CBDCs. “Ripple has a proven track record of successfully connecting disparate payment systems and championing blockchain’s utility to issue Central Bank Digital Currencies and solve for global payments to hundreds of financial institutions around the world. We are pleased that the CBCG has chosen Ripple to help launch its first digital currency and further address the country’s core financial objectives.”

Ripple has been increasing its activity related to the development of central bank digital currencies since piloting a private version of the XRP Ledger – which provided central banks with a platform to securely issue CBDCx – in March 2021.

The Royal Monetary Authority of Bhutan partnered with Ripple Labs in September 2021 to pilot test the creation of a digital ngultrum, which is intended to help the south-central Asia kingdom improve cross-border payments. Two months later, the company partnered with the Republic of Palau to help the Pacific island develop its own climate-friendly digital currency.

Last September, the firm was selected as one of the founding members of a “Technical Sandbox Program” launched by the Digital Dollar Project that is designed to explore the potential technical and business ramifications of a CBDC in the U.S. The firm also joined the European think tank Digital Euro Association in February 2022 to help facilitate the development and growth of CBDCs and the Digital Euro.

Originally published by: Jordan Finneseth on Kitco News