the Bank of France – the central bank of France – launched a call for applications to conduct a central bank digital banking experiment (CBDC) with the bank.
According to the publication, the work relating to the experiments is coordinated by the Infrastructure, Innovation and Payments Department (DIIP), within the General Directorate for Financial Stability and Operations (DGSO). The experiments will be conducted with the support of the Banque de France’s open innovation laboratory (LAB).
France is well known as a crypto-friendly jurisdiction that has created a regulatory regime that facilitates both offers of unsecured initial coins (ICOs) as well as the issuance of digital securities.
François Villeroy de Galhau, Governor of the Banque de France, said at the end of 2019:
“The creation of a central bank digital currency … is neither a prerequisite nor a guarantee of more efficient payments. However, as central banks, we must and want to respond to this call for innovation at a time when private initiatives – in particular payments between financial actors – and technologies are accelerating, and public and political demand increases. Other countries have led the way; it is now up to us to play our role, both ambitiously and methodically. “
The bank indicates that the opportunities opened up by technological progress the Banque de France is taking measures to “review and adjust the conditions under which it makes central bank money available to financial intermediaries.” With this in mind, the Banque de France is launching an experiment program to test the integration of a central bank digital currency (CBDC) into innovative procedures for the exchange and settlement of tokenized financial assets between financial intermediaries. “
Crowdfund Insider received several comments on the news that France was going ahead with the development of a CBDC. Gavin Smith, CEO of Panxora – a consortium of cryptocurrencies, said that having blocked the development of Facebook’s attempt to create its own digital currency, Libra, it is interesting to see France changing its pace towards digital currencies.
“After recent developments in China, Sweden and the UK, it is great to see another country joining the mix to develop a digital currency issued by the central bank. We are currently seeing many countries experimenting with CBDCs as they continue to recognize the versatility of digital tokens. This could have the effect of shifting the consumer market toward accepting digital tokens, increasing the use of existing cryptocurrencies and making the crypto ecosystem more valuable. “
Don guo, CEO of Broctagon Fintech Group – A provider of FX solutions and digital assets, said it was not surprising that France threw its hat in the ring to be the first to create a CBDC.
“Since China’s announcement, world powers seem to be starting to recognize the inherent benefits of cryptography. A country that can properly implement a CBDC will benefit from a completely borderless, efficient and immutable currency. One thing that banks should be careful of is to centralize these currencies. The founding principle of cryptography was decentralization, so banks must be careful not to lose sight of the benefits associated with decentralization, otherwise they risk spending precious time and resources creating another fiat currency. The most successful countries are those that can distinguish between government-issued currency and the benefits of cryptography. “
It has been widely anticipated that China will be the first to issue a yuan-based CBDC, but recent reports have indicated that the project has been delayed. Perhaps because of COVID-19 interference. In addition, China has indicated that its CBDC project will only be based on part of the distributed ledger technology.
Much of the discussion regarding CBDCs revolves around the elimination of existing inherent friction in the payment and transfer process, which increases costs due to inefficiency. The advent of a CBDC could end up being more of a step-by-step process than central banks modernizing the processes while seeking to generate benefits for consumers.
The document: Experiences of the Central Bank in digital currency with the Banque de France: call for applications, is included below.
Banque de France 200327-CBDC call for applications