- J McGlynn and M Bacina
French Central Bank hails first funds transaction using digital euro
Updated: Jan 25, 2021
The Banque de France has reportedly completed a pilot transaction with a central bank digital currency (CBDC). In The Bank announced the results of its experiment which, completed in December, simulated cash transactions worth over €2 million ($2.4 million) using their digital Euro.
The central bank joined forces with London-based SETL, a settlement and payments infrastructure provider, as part of the pilot. It was SETL’s IZNES team, responsible for SETL’s French fund administration platform and private blockchain, that facilitated the transaction.
The trial's significance
This pilot is the first of eight wholesale CBDC trials the Banque de France plans to conduct, with an overall report of the trials expected in the middle of 2021. This trial marks the beginning of France’s meaningful steps forward in the CBDC space.
The Banque de France said:
This experiment constitutes a significant advance in the evaluation of the levers that a central bank digital currency provides for strengthening the efficiency and resilience of the settlement of financial assets in a blockchain environment, and hence contribute to the proper functioning of the real economy.
SETL Chairman, Sir David Walker, also speaks highly of the recent trial's significance, commenting:
...the successful completion of a central bank digital currency live experiment with BDF confirms that SETL is uniquely positioned to help transform Financial Markets
Digital euro: coming soon?
The French central bank has now surged ahead of the rest of the EU by completing the first pilot for a digital euro. However, there are still regulatory hurdles to move from a simulation of transactions to real world transactions. Wholesale settlements are only available to organisations with existing access to central bank money.
So central banks will need to consider whether they make central bank money more widely accessible to organisations that don’t currently have access, before it can enter circulation on any large scale.
Despite Banque de France’s steps forward in trialing a CBDC, the French Finance Ministry reported an intention late last year to tighten KYC regulations applying to digital currency exchanges.