The Banque de France (BdF) has tested a cross-border central bank digital currency (CBDC) transaction with Singapore, marking the first use of a smart contract–based, automated liquidity pool for the digital EUR/SGD currency pair.
The French central bank worked with the Monetary Authority of Singapore for the experiment, one of the last in the bank’s wholesale CBDC sandbox program that finishes this autumn. It was executed using a permissioned version of Ethereum called Quorum, developed by JPMorgan.
In the context of wholesale – or bank-to-bank – CBDC transactions, cross-border payments without slow and costly intermediation is something of a Holy Grail. Cutting down on middlemen lessened the number of contractual arrangements and the Know Your Customer burden, Banque de France said.
JPMorgan’s blockchain-based Onyx suite of applications, which includes JPM coin, uses a system of automated digital contracts of the sort that have made areas like decentralized finance (DeFi) explode in the public arena.
The CBDC automated liquidity pool and market-making service for EUR/SGD currency pairs could be scaled up to support the participation of multiple central banks and commercial banks in different jurisdictions, BdF said. The use of smart contracts automatically managed the EUR/SGD exchange rate in line with real-time market transactions and demands, it said.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is an award-winning media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. In November 2023, CoinDesk was acquired by Bullish, a cryptocurrency exchange, which in turn is owned by Block.one, a firm with interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets including bitcoin and EOS. CoinDesk operates as an independent subsidiary, and an editorial committee, chaired by a former editor-in-chief of The Wall Street Journal, is being formed to support journalistic integrity.