Will XRP Become Core Technology for CBDCs? The Reality of the Large-Scale Settlement Experiment Led by the European Central Bank

According to recent analysis, Ripple’s technology is gaining attention in the development of CBDCs (Central Bank Digital Currencies), but its role is evolving into a different form than initially expected. Several central banks, including the European Central Bank (ECB), are not adopting XRP or Ripple’s underlying technology for retail CBDCs like the digital euro. Instead, they are exploring its use in other critical areas.

Large-Scale Settlement Tests Distinct from Retail CBDCs

Retail CBDCs, such as the digital euro, are digital currencies directly used by consumers and are planned to be built on centralized systems rather than blockchain technology. In contrast, Ripple’s technology is being tested for wholesale CBDC systems. As noted in the ECB’s “Annex 2,” European central banks, including the Bank of France, are using Ripple’s permissioned network to verify the implementation of large-scale interbank settlements.

Reasons for Testing Ripple’s Technology

XRP and Ripple’s underlying technology are chosen for large-scale settlement experiments because of their ability to enable fast and secure transaction processing between financial institutions. Compared to existing international remittance systems, they are evaluated for their potential to significantly improve settlement speeds while meeting compliance requirements. Multiple central banks testing this technology are gathering valuable data to shape future financial infrastructure.

Relationship Between Digital Euro and XRP Toward 2029

The rollout of the digital euro is targeted around 2029, but XRP is not expected to play a direct role in this initiative. Instead, Ripple’s technology is increasingly seen as a foundational layer to facilitate efficient fund transfers between financial institutions behind the scenes of the digital euro. The technical separation between retail CBDCs and large-scale settlement systems is a strategic design to optimize each architecture for its specific purpose.

In summary, the relationship between XRP and CBDCs is likely to evolve not through direct integration but through a division of functions across different layers, making this scenario increasingly plausible.