Key takeaways:
- The newest French CBDC experiment, led by Belgian financial services business Euroclear, used an IBM system.
- Agence France Trésor, BNP Paribas CIB, Crédit Agricole CIB, HSBC, and Societe Generale participated in experiments commissioned by the Bank of France leveraging IBM’s technology.
As part of a 10-month experiment in the country’s debt market, a group of France’s largest financial market players used a digital currency created by the Banque de France.
The securities depository Euroclear was in charge of the experiment, which involved several of France’s major banks, as well as the French public debt office and the central bank, and employed a technology built by IBM in the United States.
The pilot was part of a project commissioned by the Banque de France in March-April of last year to see how central bank-issued digital currencies would trade and settle if they were converted into tokens and transactions recorded on a digital ledger. Deals are often resolved between parties, documented, and assets transferred at a single authority like a central bank or securities depository.
It comes as worldwide authorities call on central banks to take action in the face of this year’s surge in crypto assets. Policymakers are concerned that private-sector efforts involving payments and cryptocurrency issuance might result in central banks losing control over monetary policy.
The value of the transactions was not disclosed in a report published on Euroclear’s website, but almost 500 directions in both primary and secondary markets were completed.
The partnership included BNP Paribas, Crédit Agricole CIB, HSBC, and Societe Generale.
The participants in the pilot traded government bonds and security tokens, settling their transactions using a CBDC provided by the central bank. The research looked at how a CBDC may be used in a variety of scenarios, including issuing new bonds, utilising them in buyback agreements, and paying coupons and redeeming deals.
“We have together successfully been able to measure the inherent benefits of this technology, concluding that the central bank digital currencies can settle central bank money safely and securely,” said the Euroclear executive Isabelle Delorme.
The project “went well beyond previous blockchain initiatives,” according to Soren Mortensen, IBM’s global director of financial markets, because it successfully trialled “most central securities depository and central bank processes” while eliminating existing intermediate steps like market intermediary reconciliation.
While the EU and the US are still in the early phases of development, the danger of private cryptocurrencies, such as fiat-pegged stablecoins, has encouraged a number of countries to explore CBDCs. China is leading the way with the adoption of a CBDC for use in its home market, and it aims to expand its CBDC trials to international visitors during the Winter Olympics in Beijing next year.
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