The French Central Bank announced recently that its wholesale central bank digital currency (wCBDC) will increase cross-border payments, settlement finality, and security for a wide range of financial assets after undertaking multiple tests utilising crypto-powered technology.
“Through these experiments, the Banque de France demonstrates the operational feasibility and practical implementation of the three models it has conceptualised for issuing wCBDC directly on DLT [distributed ledger technology],” the central bank said, adding that various types of DLT were used to test applications in asset tokenization and cross-border transaction improvement.
In March 2020, the Banque de France began experimenting with a wCBDC. It executed twelve trials thus far, including one to settle a bond worth 100 million euros ($104 million) with Luxembourg. Other experiments include collaborations with the Singapore Monetary Authority, the Swiss National Bank, and the Bank for International Settlements’ Innovation Hub.
According to the bank, the studies have revealed that a wholesale CBDC would “be key for native digital assets and tokenized assets that fall under the category of unlisted financial assets and cannot currently be settled.”
Central banks all across the world are actively experimenting with CBDCs to improve wholesale settlements, with the monetary authority organisation BIS driving many studies. Similar testing have already begun in India, and the European Central Bank will begin in 2024. Supporting Europe’s exploratory work, according to the French central bank, will be one of the next stages.
The French central bank discovered that issuing a wholesale CBDC would complement retail CBDCs such as a digital euro. The banks stated that interoperability for easy data interchange, international coordination, and public-private partnerships for a more inclusive global CBDC framework remain top priorities. The bank claims that “climate concerns highlight the need to develop energy-efficient solutions in the design of wholesale CBDCs.”