Banque de France green-lights a digital euro
The experiment’s findings highlight that a wholesale CBDC should be considered further
A green light for a digital euro was glimpsed recently in Frankfurt as European Central Bank (ECB) executive board member Fabio Panetta said in a speech at Madrid’s Royal Elcano Institute: “The digital euro would be the monetary anchor for the digital era.”
The last experiment on a wholesale central bank digital currency (CBDC) was conducted by the Banque de France, which was done ahead of results from the ECB investigation scheduled for July 2023.
“The experiment’s findings highlight that a wholesale CBDC should be considered further, in particular to complement the Eurosystem’s ongoing work on a digital euro for retail purposes,” said Banque de France researchers.
The French report
The report from Banque de France showed how a wholesale euro CBDC could be part of central banks’ strategies to accompany the rise of tokenised finance, although its macroeconomic and monetary policy implications are still of concern.
“A wholesale CBDC would stand as a way to accompany innovation while maintaining current standards in terms of settlement safety through the use of CeBM [central bank money] as a settlement asset for wholesale transactions,” said the Banque de France researchers.
The researchers added: “It could also play a unifying role for financial markets, preventing the fragmentation that could arise from the development of private settlement assets functioning in closed loops with only limited interoperability.”
Paving the way for cross-border payments
Banque de France’s experiments also explored how cross-border payments could be enhanced by implementing various configurations for multi-CBDC arrangements.
“The experiments underlined that a wholesale CBDC could contribute to faster, cheaper, more transparent and more inclusive cross-border payments, assuming central banks can efficiently cooperate in this matter,” noted its researchers.
However, the report also raised some open questions to be further investigated, being that “the macroeconomic and monetary policy implications of issuing a wholesale CBDC potentially available to a larger set of participants need to be clarified, as well as the technical implications of controlling a wholesale CBDC “.