Digital Dollar Project and Western Union Successfully Conclude CBDC Retail Remittance Pilot


The Digital Dollar Project (DDP) recently concluded a successful pilot study focused on remittance payments to the Philippines using a simulated retail central bank digital currency (rCBDC). Collaborating with Western Union and BDO Unibank, the project aimed to explore the potential of CBDCs for cross-border remittances.

During the pilot, the DDP employed its Champion Model, where a simulated central bank issued CBDCs to an intermediary bank, granting access to Western Union for facilitating remittances to a BDO Unibank customer in the Philippines. To convert the dollar CBDC to a Philippine peso CBDC at a real-time exchange rate, Western Union utilized a decentralized exchange (DEX) interfaced with a third-party oracle. Once the exchange was complete, Western Union received payment confirmation and seamlessly transferred the funds to the recipient’s account.

One notable aspect of the study was that the entire transaction utilized central bank money instead of commercial bank money, a departure from current remittance practices. The decentralized exchange (DEX) played a pivotal role in the process, offering potential benefits such as increased transparency and competition in the space. However, the study also highlighted challenges associated with the time zone difference between the locations, as most remittances to the Philippines take place when trading is closed in Manila.

Privacy considerations were not the main focus of the study, although the report acknowledged that distributed ledger technology (DLT) could afford better control over consumer data sharing.

The use of distributed ledger technology enabled instantaneous and simultaneous transfer of both the message and the value. This contrasts with current technology, where value transfer often lags behind the message transfer, introducing counterparty and credit risks.

The findings of the pilot suggested that CBDCs have the potential to modernize processes and improve efficiencies for private sector companies like Western Union and BDO Unibank, rather than replacing their existing services.

Remittances, which typically range between $200 and $300 per transaction, had a total value of $626 billion in 2022, according to research cited in the report. In 2021, the United States alone sent $74 billion in remittances, with approximately 7% of U.S. households engaging in such transactions.

Traditionally, remittances from the U.S. to the Philippines incur fees of around 4.4% on a total transaction of $200, while bank transfers have an average cost of 7.98%. The simulated process in the pilot study promises time and cost savings, as well as increased transparency.

The DDP, co-founded by former Commodity Futures Trading Commission Chair Christopher Giancarlo, had previously launched its technical sandbox in September, aiming to explore and develop the potential use cases for CBDCs. Accenture also played a supportive role in the project. The successful completion of the pilot marks a significant milestone in advancing the understanding and application of CBDCs for remittance purposes.

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