The upcoming rollout of Central Bank Digital Currencies (CBDCs), envisioned as an indirect two-tier system, will create a significant market for the development of specialized support software solutions. While the core CBDC infrastructure will be established by central banks, there will nevertheless be a clear need for additional functionalities and programmability to support various processes and use cases, including cross-border debt collection.
Current legislative frameworks outline the importance of effective debt collection processes, which will need to be adapted for the reality of CBDCs. However, the specific mechanisms and technologies required for this task within the blockchain ecosystem remain to be fully defined.
To address this gap, we propose a standardized framework, that by leveraging XRPL and its Trust Line Functionality will result in a commercially viable protocol that can be easily integrated by commercial banks and Payment Service Providers (PSPs), positioning Ripple as a pioneering enterprise in this emerging market.
01
The Current State
The current landscape of cross-border debt collection is plagued by inefficiencies, high costs, and complexities. The lack of standardized practices, coupled with the unique characteristics of CBDCs, will create significant hurdles for businesses and financial institutions engaged in international trade. The current process is often frustratingly slow, costly, and legally complicated due to differences in legal systems and jurisdictions. These challenges can lead to delays in payments, disputes, and are damaging to business relationships and international trade. The XRPL Grants program offers a unique opportunity to address these pressing issues by fostering innovative solutions that leverage the power of blockchain technology.
02
The Opportunity
Central Banks will create their CBDCs in a manner that would delegate debt collection to payment service providers or banks. Centralizing the documentation and decision making is too burdensome and expensive. Therefore, soon enough there will be a need for a CBDC debt collection solution. The lack of standardized practices, coupled with the unique characteristics of CBDCs, will create significant hurdles for businesses and financial institutions engaged in debt collection resulting from international trade. The situation needs a Ripple effect - helping banks, help their customers in a transparent and secure manner.
03
​Why Now
​CBDCs are going to be the future of the monetary system. Their implementation in the coming years provides immense opportunity. Ripple is uniquely positioned to create a solution for CBDCs in a manner that would be universally applicable. When CBDCs gather steam, they would have already found their solutions, and this proposal can position Ripple in the top tier of cross-border solutions.
According to the Bank for International Settlements (BIS), the tokenization of money and assets on programmable platforms could significantly enhance the financial system by enabling new types of economic activities and improving existing processes.
04
The Solution
To address the inefficiencies and complexities of cross-border debt collection, we propose a standardized framework leveraging the capabilities of XRPL. This framework would establish clear guidelines and protocols for debt establishment, information sharing, dispute resolution, and enforcement. By utilizing XRPL's distributed ledger technology, we can ensure transparency, security, and efficiency in the debt collection process. Additionally, the framework would promote interoperability between different CBDC systems, facilitating seamless cross-border transactions. This standardized approach would not only reduce costs and delays but also foster greater trust and confidence in the global financial system. Further, it will support CBDC adoption and utilization of the great potential this technology holds to transform economies for the better.
05
The Impact
The successful implementation of the standardized framework for cross-border debt collection in CBDCs would have a significant impact on the global financial landscape. By streamlining the process, reducing costs, and enhancing transparency, the project would foster greater trust and confidence in the use of CBDCs for international trade. This, in turn, could lead to increased economic activity, job creation, and improved financial stability. Furthermore, the project's focus on standardization and interoperability would contribute to the broader adoption and success of CBDCs, promoting a more inclusive and efficient global financial system.
06
The Market
Target Market: The CBDC debt collection framework targets financial institutions globally involved in cross-border transactions or considering CBDC adoption, including commercial banks, payment service providers, money transfer operators, and trade finance institutions.
Market Size: Given the seeming inevitability of CBDCs and the growing volume of cross-border transactions, the Total Addressable Market (TAM) for this product will be substantial. The Serviceable Available Market (SAM) will depend on factors like geographic focus, regulatory environment, and competition. The Serviceable Obtainable Market (SOM) would be influenced by product differentiation, go-to-market strategy, and pricing.
07
Competitive Landscape for CBDC Debt Collection
Direct Competitors: There are no direct competitors offering a standardized framework specifically for CBDC debt collection yet.
Competitive Advantages of the Proposed Solution:
Standardization: The proposed framework offers a standardized approach, providing consistency and efficiency across different jurisdictions.
Leveraging XRPL: Utilizing the capabilities of XRPL can provide unique advantages, such as enhanced security, transparency, and interoperability.
Ripple's Expertise: Ripple's experience in blockchain technology and cross-border payments can give it a competitive edge.
08
Stakeholder Benefits
The standardized framework for cross-border debt collection would offer significant benefits to various stakeholders:
Businesses: Reduced costs, faster payment processing, and increased efficiency in international trade.
Financial Institutions: Improved risk management, reduced operational costs, and enhanced customer satisfaction.
Governments: Greater transparency, improved regulatory oversight, and potential revenue generation through fees associated with the framework.
CBDC Users: Increased confidence in the use of CBDCs for cross-border transactions and protection against fraudulent activities.
XRPL Community: Promotion of XRPL as a valuable tool for facilitating innovative financial solutions and driving broader adoption of blockchain technology
09
The Development
As the mirror chain concept will heavily utilize Ripple's CBDC Product, we anticipate that the technical development under this proposal will be done in close collaboration with Ripple.
This includes recommendations on in-house or external expertise to be acquired that are well-acquainted with Ripple's CBDC functionalities.
Understanding that adapting Ripple's CBDC to the parameters laid down here will require significant resources, we have budgeted $90,000 to acquire the needed technical expertise.
Long-term Benefits for Ripple
The successful implementation of this standardized framework for cross-border debt collection in CBDCs can offer several significant long-term benefits for the Ripple CBDC project:
1
Strengthening Ripple's Position in the CBDC Market
Market Leadership: By providing a valuable and innovative solution, Ripple can solidify its position as a leading provider of CBDC infrastructure and solutions.
Increased Adoption: The project can attract more financial institutions, businesses, and developers to the XRPL ecosystem, driving broader adoption of CBDCs.
Partnerships & Collaborations: Ripple can form strategic partnerships with central banks, governments, and other stakeholders to expand its reach and influence in the CBDC space.
2
Driving Adoption of CBDCs:
Improved User Experience: The standardized framework can enhance the user experience for businesses and individuals using CBDCs, making them more accessible and attractive.
Reduced Barriers: By addressing challenges like cross-border debt collection, the project can remove barriers to CBDC adoption and encourage wider usage.
Positive Perception: The success of the project can improve the overall perception of CBDCs as a viable and beneficial technology.
3
Fostering Innovation
New Use Cases: The project can stimulate innovation in the CBDC space, leading to new products, services, and use cases beyond debt collection.
Developer Ecosystem: Attracting more developers to the XRPL ecosystem can foster innovation and create new opportunities for entrepreneurs.
Competitive Advantage: Ripple can gain a competitive advantage over other CBDC platforms by offering a comprehensive and standardized solution.
4
Contributing to Global Financial Stability
Reduced Risks: The project can help reduce risks associated with cross-border transactions, such as fraud, disputes, and delays.
Enhanced Interoperability: By promoting interoperability between different CBDC systems, the project can contribute to a more interconnected and stable global financial system.
Economic Growth: A more efficient and transparent cross-border payment system can facilitate trade, investment, and economic growth.
By realizing these long-term benefits, Ripple can position itself as a key player in the CBDC space, driving innovation, promoting adoption, and contributing to a more stable and interconnected global financial system.
the USE Case
Standardized
Framework
​A set of clear guidelines and protocols for debt establishment, information sharing, dispute resolution, and enforcement, designed to streamline the debt collection process and ensure consistency across different jurisdictions.
A. Review differences in establishing a debt across main jurisdictions
B. Recognition of arbitrages or foreign court decisions, security of information transfer
C. Redress process and implications in different jurisdictions (e.g. provisional measures, right of creditors to receive damages, fraud, etc.)
D. Dealing with sensitive information
E. Enforcement of the collection decisions, data sharing and checks.
F. Liabilities of courts, cour officers, authorities, payment service providers
G. Smart contracts, kill-switches and liabilities to third parties
H. Bankruptcy and succession, seniority of creditors, protection mechanisms against creditors
I. Protections against identity theft
The Prototype
We want to utilise Ripple's Trust Line functionality to ensure private debt could be collected from the accounts of clients. To that end we propose mirroring CBDC accounts into a Ripple CBDC infrastructure.
To demonstrate the feasibility of that approach we want to set up a basal prototype with the help of a dedicated Ripple dev team with the following characteristics:
1. Ability to Automatically Mirror Accounts from Different Blockchain Platforms (e.g., Corda)
Tech Used: XRPL (XRP Ledger)
Functionality: Create a mirrored blockchain network that replicates accounts from various blockchain platforms onto the XRPL infrastructure and vice versa.
Purpose: Ensure seamless integration and interoperability between different blockchain platforms and the XRPL concerning management of accounts.
2. Use of Trust Lines within the Mirroring System
Tech Used: XRPL Trust Lines
Functionality: Implement Trust Lines to create new accounts in the mirrored blockchain platform, allowing for freezes, stays, and guarantees.
Purpose: Provide mechanisms to enforce court orders and manage debt collection processes effectively.
3. Automated Check for Authenticity of Court Orders for Freezes/Collection
Tech Used: Blockchain Oracles (e.g., Chainlink)
Functionality: Implement automated checks to verify the authenticity of court orders and other legal documents.
Purpose: Prevent fraud and ensure that all actions taken within the system are based on legitimate and verified information.
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Cross-Border Debt Collection for Central Bank Digital Currencies
The upcoming rollout of Central Bank Digital Currencies (CBDCs), envisioned as an indirect two-tier system, will create a significant market for the development of specialized support software solutions. While the core CBDC infrastructure will be established by central banks, there will nevertheless be a clear need for additional functionalities and programmability to support various processes and use cases, including cross-border debt collection.
Current legislative frameworks outline the importance of effective debt collection processes, which will need to be adapted for the reality of CBDCs. However, the specific mechanisms and technologies required for this task within the blockchain ecosystem remain to be fully defined.
To address this gap, we propose a standardized framework, that by leveraging XRPL and its Trust Line Functionality will result in a commercially viable protocol that can be easily integrated by commercial banks and Payment Service Providers (PSPs), positioning Ripple as a pioneering enterprise in this emerging market.
