France’s central bank has released a new report on financial stability in an era of digitization that multiple times touches on virtual currencies and blockchain technology.
The report notes that the Banque de France is conducting its own research into the topic in cooperation with the Financial Stability Board (FSB), a body of central bank governors and government officials from the G-20 group of nations. The FSB highlighted its work in the area in February, and more recently, has been looking at the technology through the lens of financial innovation.
According to a loose translation of the Banque de France report:
“Furthermore, consideration is being given today [by] the Bank of France, and more widely within…the Financial Stability Board to follow the development of initiatives around the technology blockchain, both as regards [to the] application possibilities it seems to offer…with respect to the issues raised[,] particularly in terms of security.”
Elsewhere, the report highlights how the technology could be used to reshape how markets function.
“Such [distributed ledger] models could replace the traditional operating mode clearinghouses based on aggregation and centralized clearing flows, affecting…the collateral management devices or rules for recording assets,” the report states.
At the same time, the Banque de France report authors argue that the technology is “still very largely in the experimental phase”. The report said that future tests have to assess blockchain applications “in terms of safety, cost, [their] ability to handle quickly large volumes of transactions, or [the] economic interest to do without third trust for certain activities.”
Work on digital currencies
Beyond its look at blockchain applications, the French central bank indicated that it has been looking at issues related to bitcoin and other digital currencies. It pointed to a previous investor-oriented release in 2013, as well as its work with the FSB on the matter.
While light on policy details, the report suggests that central bankers should look at “conversion activity” by bitcoin exchanges between digital and fiat currencies.
The report also highlights some data regarding digital currency transaction volume in the European Union, positioning it against the flow of euros on a daily basis.
“But [virtual currency] use is still very low: the amounts exchanged are lower [than] €100m per day for volume [of] less than 200,000 transactions, compared to 70 billion euro of payments corresponding to 250 million operations performed every day in the European Union,” the report states.
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