Several countries have already begun or finished testing their Central Bank Digital Currencies across the world. The French Central Bank has recently revealed that it is looking to test the CBDC for inter-bank settlements. The Central Bank has invited all interested parties to submit their applications.
According to a document published by the Bank of France on 30 March, the Bank invited applications to test the use of a virtual euro. The aim of the central bank is to explore the potential solutions that CBDC can provide to clear and settle digitized financial assets.
CBDC will not necessarily be using blockchain technology
However, despite the Bank of France advocating for blockchain-based solutions to settle payments across the continent before, the bank has claimed that it has not established any particular technology in its proposed CBDC test.
According to the document, ten CBDC-related applications will be selected by the French central bank between firms or individuals. The bank says that this approach would help to create an “innovative nature” as a critical selection benchmark.
In addition, the Bank of France emphasizes, according to another detailed document, that applications should be submitted by persons within the European Union; or in a State Party to the Agreement on the European Economic Area. Interested applicants have to file their applications until May 15, 2020. The selection process of the applications will commence on July 10.
Key objectives of the CBDC testing program
The CBDC testing program focuses on three key objectives, which include forming the CBDC solution for inter-bank settlement; highlighting its benefits; and exploring the potential risks involved. The Bank of France has outlined three CBDC use cases such as payment against financial instruments, as a method of settlement against other CBDCs; and as a method of settlement against cryptocurrencies.
The bank has pointed out that it will not participate in the creation of money during its Central Bank digital currency test program. In addition, the bank has made it clear that the token displaying the figures in Euro in the virtual form will be destroyed after the accounts on which the transactions are settled.
The central bank also stated that it would not apply whichever program at a broad scale. The bank noted:
“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.”
France allegedly plans to issue CBDC by Q2 2020
The Bank of France’s latest CBDC program marks the first time that the Central Bank has been speaking about CBDC since December last year. Bank of France Governor François Villeroy de Galhau back on 4 December last year reported that the bank is planning to begin the pilot phase of the CBDC in Q2 this year.
On the other hand, the deputy governor of the central bank, Denis Beau, has formerly noted that blockchain-based payments; can be used to enhance several payments and financial processes.
In conclusion, back in March, the French market watchdog, the Autorité des Marchés Financier suggested a regulatory sandbox; to test and investigate the potential advantages of using virtual assets within the EU.