Bank of France Begins Piloting of Central Bank Digital Currency

In line with countries such as Sweden and Bahamas which are piloting their CBDC (Central Bank Digital Currencies), French central bank (Banque de France) has also unveiled its CBDC program.

The Bank of France has now initiated a series of trials to assess the pros and cons of using CBDC for interbank settlements, luring likely partakers to present their applications.

As per the record released on March 30, central bank of France has requested applications to trial with the utilization of a digital euro, intending to study the likely CBDC use in clearing and settlement of tokenized financial assets.

Even though Bank of France earlier suggested the use of blockchain powered platforms for settlements in Europe, the bank stated that it does not adopt any particular technology to conduct its latest CBDC piloting project.

To begin with, the central bank of France is selecting up to 10 CBDC related projects executed by individuals or teams, setting up “innovative nature” as a key selection standards.

As per an elaborative document, apps must be handed by the EU based applicants or in from a state which is a party to the European Economic Area agreement.

The last date for submission of application is May 15, 2020. Selection process will continue until July 10. The bank’s CBDC trial has three goals such as prototyping as CBDC-powered interbank settlement and discovering advantages and assessing the likely threats.

Of the three likely CBDC use scenarios, the Bank of France highlights funding against financial instruments, funding against the CBDC issued by other central banks and funding against cryptos.

The bank stressed that it will not trial the CBDC to increase liquidity. Furthermore, the central bank stated that it will remove the tokens representing the euros in virtual format from the system at the end of the day on which settlement was carried out. The Bank of France also revealed that it has no intention to scale up the trial.

“These experiments will act as a contribution by the Banque de France to a broader discussion within the Eurosystem, which will make any decision on whether to set up a CBDC. The tests are not intended to be continued on a long-term basis or applied on a wide scale by the Banque de France itself.”

The new CBDC venture from the central bank of France follows the statement made by the bank on CBDC for the first time on December 2019.

Specifically, on December 4, the bank’s governor François Villeroy de Galhau stated that the bank will begin trialing the digital euro venture by the end of first quarter of this year.

Earlier, Denis Beau, the first deputy governor of Banque de France stated that blockchain technology could pave way for several financial and settlement procedures including trans-border currency payments.

Earlier this month, the country’s regulator, the Autorité des Marchés Financiers, suggested a regulatory sandbox to trial and study likely benefits of security tokens with the EU.