French and Swiss trial central bank digital currency
France and Switzerland’s central banks experiment with CBDC
Banque de France, the Swiss National Bank, the BIS Innovation Hub and a private sector consortium led by Accenture are to conduct an experiment using wholesale central bank digital currency (CBDC) for international payments.
Sylvie Goulard, deputy governor of the Banque de France, said cross-border payments would take place between banks in France and Switzerland.
The experiment will explore cross-border settlement with two wholesale CBDC and a French digital financial instrument on a DLT platform.
A centralised digital currency
Central bank digital currencies are centralised digital currencies that are backed by securities such as cash, gold or oil and regulated by national central banks.
The latest project will involve the exchange of the financial instrument against a euro wholesale CBDC through a delivery versus payment (DvP) settlement mechanism and the exchange of a euro wholesale CBDC against a Swiss franc wholesale CBDC through a payment versus payment (PvP) settlement mechanism.
These transactions will be settled between banks domiciled in France and in Switzerland, respectively.
Tokenised assets and wholesale CBDC
The news comes months after France’s central bank, Banque de France, transacted with its own CBDC. Andréa M. Maechler, a member of the governing board of the Swiss National Bank, said it was essential for central banks to stay on top of technological developments.
"The Swiss National Bank is already investigating the settlement of tokenised assets with wholesale CBDC as part of Project Helvetia," he said. "We are looking forward to expanding this analysis to a cross-border context by participating in this exciting initiative.”
"Project Jura expands on central bank experimentation investigating the effectiveness of wholesale CBDC for cross-border settlement. It is of an exploratory nature and should not be interpreted as an indication that the Banque de France or the Swiss National Bank plan to issue wholesale CBDC."
Fiorenzo Manganiello, a LIAN group partner and professor in venture capital and blockchain at the Geneva Business School, said that since 2014, when the Chinese government created a central bank digital currency (CBDC), the digital yuan central banks have been playing catch-up.
"Seven years later, the Bank for International Settlements (BIS) estimates that 86% of central banks around the world are researching digital currencies. About 60% them are developing their own digital currency, and 14% have already begun deploying pilot projects," he said.
“Central bank digital currencies have an advantage over cryptocurrencies as they provide the same services but with the safety net of reliable governance. The privacy component still exists but would be controlled to respect the regulations and laws of the country."