The French central bank is planning to conduct experiments on a central bank digital currency (CBDC). Known as the Banque de France, the regulator has called for applications from European companies to help it in its quest. It however doesn’t intend to replace the existing system and is only playing its part as a member of the Eurosystem.
Europe has been one of the regions where the possibilities of a CBDC have been high as the region strives to keep up with North America and Asia in the ever-evolving financial ecosystem. Despite this, no country has managed to launch its CBDC yet, with The Netherlands, Sweden and Norway already conducting research on this. France is now set to join these countries, experimenting with the use of a central bank digital currency for interbank settlements.
In its request for proposals, the Banque de France said that the aim of the experiment is to “explore the potentialities offered by this technology, and to identify concrete cases integrating Central Bank Digital Currencies in innovative procedures for the clearing and settlement of tokenised financial assets.”
In an accompanying report, the regulator stated that it doesn’t intend to replace the existing fiat currencies. Rather, it will enable the bank to identify how innovative technologies, such as digital currencies, could improve “the efficiency and fluidity of payment systems and financial infrastructures.”
The experiment will have three crucial aims, with the first being to show how a CBDC could be used for interbank settlements. It will also help identify the benefits of a CBDC and how it could promote financial innovation as well as analyzing the effects that it could have on financial stability and the regulatory environment.
The results of this experiment will be France’s contribution to a broader experiment on the viability of a CBDC by the Eurosystem. This is the monetary authority of the Eurozone—a group of countries that use the euro as their sole official currency. France is one of the most crucial members, along with Germany, Italy and Spain. The Banque de France may not end up creating a CBDC, with the report stating, “Indeed, any decision to create a CBDC is a matter for the Eurosystem. Consequently, the Banque de France does not intend to perpetuate or conduct such experiments on a widespread basis.”
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