The central bank of France officially announced a program of experiments to test the interbank integration of central bank digital currencies.
As a number of global jurisdictions like the Bahamas and Sweden are already testing their central bank digital currencies (CBDC), French central bank is getting more straightforward regarding its own CBDC plans.
The Bank of France is now officially launching a program of experiments to test the integration of a CBDC for interbank settlements, inviting potential participants to submit their applications.
Bank of France doesn’t insist on blockchain implementation for CBDC
According to a March 30 document, France’s central bank is calling for applications to experiment with the use of a digital euro, aiming to explore the potential CBDC opportunities for clearing and settlement of tokenized financial assets. Although the Bank of France previously called for blockchain-based settlement systems in Europe, the bank said that it doesn’t impose any specific technology within its newly announced CBDC experiment program.
As such, French central bank will select a maximum of 10 CBDC-related applications by groups or individuals, establishing “innovative nature” as a major selection criterion. According to a detailed document calling for applications, applications must be submitted by European Union-based applicants or in a state party to the European Economic Area agreement. Applicants can submit until May 15, 2020, while selection of applications will take place on July 10, the bank announced.
Three use cases to be explored
The bank’s CBDC experiment has three objectives such as modeling as CBDC-based interbank settlement and identifying benefits and analyzing the potential risks. Among three potential CBDC use cases, the Bank of France outlines payment against financial instruments, payment against other central banks’ digital currency and payment against digital assets.
The bank emphasized that it will not engage in money creation within its CBDC experiment. Additionally, the central bank noted that it will be destroying the token reflecting the amount in euros in digital form at the end of the accounting day on which payment was made.
The Bank of France also highlighted that it doesn’t plan to apply any project on a wider scale, stating:
“These experiments will act as a contribution by the Banque de France to a broader discussion within the Eurosystem, which will make any decision on whether to set up a CBDC. The tests are not intended to be continued on a long-term basis or applied on a wide scale by the Banque de France itself.”
Bank of France purportedly wanted to launch a CBDC by Q2 2020
The new CBDC project from the central bank of France apparently marks the first time when the bank talked about CBDC since December 2019. On Dec. 4, the bank’s governor François Villeroy de Galhau reportedly announced that the bank will start testing the digital euro project by the end of the first quarter 2020. Previously, Denis Beau, the first deputy governor of Banque de France pointed out that blockchain technology could facilitate a number of financial and payment processes including cross-currency settlement.
In early March, France’s markets regulator, the Autorité des Marchés Financiers, proposed a regulatory sandbox to experiment and explore potential benefits of security tokens within the European Union.