The French central bank is not alone in conducting wholesale trials of central bank digital currencies. For example, the Bank of England (BoE) is set to run a similar test soon.
The French central bank, the Bank of France has a statement Results of extensive testing involving Wholesale Central Bank Digital Currency (wCBDC).
The Bank of France’s experiments demonstrated the operational feasibility and practical implementation of issuing a WCBDC directly on distributed ledger technology (DLT).
Promote cross-border payments and final settlement
With its findings, the central bank stressed that a wholesale central bank digital currency can play a pivotal role in improving cross-border payments, settlement finality, and security for a wide range of financial assets. Cross-border payments have long been plagued by inefficiencies, delays and high costs. The emergence of wholesale CBDCs could represent a paradigm shift in this landscape.
This would lead to faster, cheaper and more transparent cross-border payments, facilitating international trade and investment. Moreover, the real-time settlement finalization enabled by the Central Bank of Wholesale Central Banks ensures that transactions are executed instantly and with irreversible confirmation.
This eliminates settlement risk, reduces exposure to market volatility, and enhances financial stability and confidence in the system.
Another great aspect of wholesale CBDC capabilities is their ability to accommodate a wide variety of financial assets. From government bonds to equity financing and unlisted financial assets, the tokenized form of central bank money could revolutionize how these assets are held and exchanged.
Traditionally, some financial assets, especially unlisted assets, face limitations in terms of settlement options. By introducing a wholesale central bank digital currency, these assets can be converted into tokens and exchanged on a digital platform, providing a more efficient and secure settlement process.
Furthermore, the BF indicated that issuing a wholesale central bank digital currency would complement retail central bank digital currencies such as the digital euro.
CBDC initiative
In March 2020, the Bank of France embarked on an ambitious path to explore wholesale possibilities of central bank digital currencies. The goal was to harness the potential of cutting-edge cryptographic technologies to enhance various aspects of financial operations.
By mid-2022, the Banque de France had completed the first phase of the trials and was ready to move on to the second phase. Building on insights gained from the first round of tests, the central bank has expanded its experiments to address more complex financial scenarios.
This phase allowed the Banque de France to fine-tune the functions of the WCBDC and address any potential challenges that arose during the initial testing period. During its journey with the WCBDC, the Banque de France has successfully completed twelve trials, each exploring different aspects of digital currency implementation.
Notably, one of the pilot experiments involved settling a €100m ($104m) bond with Luxembourg using WCBDC. The successful execution of this transaction demonstrated WCBDC’s ability to streamline large-scale financial operations, including inter-bank and cross-border settlements.
Meanwhile, the French central bank is not alone in experimenting with wholesale central bank digital currencies. For example, the Bank of England (BoE) is set to run a similar test soon.
the next
Benjamin Godfrey is a blockchain enthusiast and journalist who enjoys writing about real-world applications of blockchain technology and innovations to drive public acceptance and global integration of the emerging technology. His desire to educate people about cryptocurrencies has inspired his contributions to popular blockchain media and websites.