Since a continuous shifting from fiat to cryptocurrencies challenge the definition of money and even the role of the whole monetary policy, central banks have been under pressure to respond to the development of cryptos and even explore the abilities of issuing their own digital currencies.
With more and more countries testing their own Central Bank Digital Currencies (CBDC), the Bank of France announced yesterday the launch of its experimental program, that aims to test the integration of a CBDC for interbank settlements.
According to the official statement, the Bank of France is calling for applications to experiment on use of CBDC. Reportedly, the main purpose of the program will be exploring the technical possibilities and identifying concrete cases of CBDC integration in innovative procedures for the clearing and settlement of tokenized financial assets.
The experimental program will be exploring objectives, such as test use cases of interbank settlements carried out using the CBDC, as well as identifying benefits of CBDC and analyzing their effects on financial stability, monetary policy and the regulatory environment.
The Bank added that it will not engage in money creation in the context of CBDC experiments. However, the token reflecting the amount of Euros in digital form will be destroyed at the end of the accounting day on which payment was made.
According to the announcement, the result of these experiments will come as French contribution to a broader implementation of CBDC in the whole Eurosystem. As all the decisions on creating digital Euro belong to the Eurozone countries, the Bank of France states, the country does not intend to continue or conduct such experiments on a wide scale.
Bank of France has previously revealed its opinion on CBDC, when François Villeroy De Galhau, the head of the Bank of France told last year, that as other countries have paved the way towards the CBDC, France will start calling for experimental CBDC project before the end of the first quarter of 2020.
He also added, that the Bank of France is particularly keen to take part in experiments to integrate a “wholesale” CBDC into innovative procedures for exchanging and settling tokenised financial assets.
He also added that the Bank of France is particularly keen to take part in experiments to integrate a “wholesale” CBDC into innovative procedures for exchanging and settling tokenized financial assets.
The so-called wholesale payments are made between financial institutions that already use blockchain possibilities. As players of the institutional financial sector are “much more digitally mature than private individuals”, according to De Galhau, there would be some advantage in moving rapidly to issue at least a wholesale CBDC.