The French Central Bank has determined that its wholesale central bank digital currency (wCBDC) would improve cross-border payments, settlement finality and security for a vast range of financial assets after conducting numerous tests using technologies that power crypto, it announced on Friday.
"Through these experiments, the Banque de France shows the operational feasibility and practical implementation of the three models it has conceptualized for issuing wCBDC directly on DLT [distributed ledger technology]," the central bank said, adding that different types of DLT were used to test applications in asset tokenization and the improvement of cross-border transactions.
Banque de France began experiments on a wCBDC in March 2020. It conducted a second stage of experiments by mid-2022 and has so far completed twelve experiments, including one to settle a bond worth 100 million euros ($104 million) with Luxembourg. Other experiments include projects with the Monetary Authority of Singapore, the Swiss National Bank and the Innovation Hub of the Bank For International Settlements (BIS).
The experiments have shown a wholesale CBDC would "be key for native digital assets and tokenized assets that fall under the category of unlisted financial assets and which cannot currently be settled," according to the bank.
Central banks the world over are actively experimenting on CBDCs to improve wholesale settlements, with monetary authority grouping BIS leading multiple experiments. India has begun similar tests, while the European Central Bank is set to start in 2024. The French central bank said supporting Europe's exploratory work will be one of the next steps.
Among policy takeaways, the French central bank found that issuing a wholesale CBDC would complement a retail CBDCs such as a digital euro. Interoperability for seamless data exchange, international cooperation and public-private partnerships for a more inclusive global CBDC framework remain priorities, the banks said.
According to the bank, "climate concerns highlight the need to develop energy-efficient solutions in the design of wholesale CBDCs."
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