P Xenos and M Bacina
Bank of France flourishes experiment program on central bank digital currency
The Banque de France has officially ramped up its own plans to release its central bank digital currency, by officially launching a program of experiments to test the integration of a CBDC for inter bank settlements.
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.
The bank has said that it does not impose any specific technology within its newly announced CBDC experiment program, and will select a maximum of 10 CBDC-related applications by groups or individuals, establishing “innovative nature” as a major selection criterion.
Applications must be submitted by European Union-based applicants or in a state party to the European Economic Area agreement. Applicants have until 15 May 2020 to make a formal application.
The bank’s CBDC experiment has three objectives:
modeling as CBDC-based inter bank settlement; and
identifying benefits; and
analyzing the potential risks
The bank have affirmed that it will not engage in money creation within its CBDC experiment. and will begin destroying the token reflecting the amount in euros in digital form at the end of the accounting day on which the payment was made.
The Bank of France does not 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.
The new CBDC project from the central bank of France signals the first time the bank has openly referenced its CBDC since December 2019. Denis Beau, the first deputy governor of Banque de France had previously stated that block chain technology could facilitate a number of financial and payment processes including cross-currency settlement.
It was only in early March of this year where 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. It is promising to note that even in such troubling times, the French continue to push forward with their plans to launch their CBDC.