France to test digital currency in Q1 2020

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France intends on testing its central bank digital currency (CBDC) in the first quarter of 2020. According to a report by Les Echos, the Banque de France aims at becoming the first in Europe to launch a CBDC. The bank will seek to use the digital currency to improve the efficiency of the country’s financial system.

The governor of the Banque de France François Villeroy de Galhau revealed that the currency will be reserved for financial institutions. Speaking at an event organized by the French Prudential Supervision and Resolution Authority, the governor stated, “We intend to start experimenting quickly and launch a call for projects (for private sector players) by the end of the first quarter of 2020.”

The French government is acting in haste as it seeks to counter the efforts of private institutions such as Facebook’s Libra and other governments as well, such as China. The governor admitted to this, stating that the CBDC would give the French government the leverage it needs “for asserting our sovereignty against private initiatives of the Libra type.”

The Banque de France also intends to stay ahead of other major economies which have expressed similar interests, key among them China. By becoming the first major economy in Europe to issue a CBDC, it would establish itself as a leader on the field. The governor noted that France intends to be “the first issuer at the international level and thus derive the benefits reserved for a reference CBDC.”

The CBDC will be for institutional use for now. The Banque de France has put some thought into retail use, but this is just hypothetical for now. Retail CBDC would be a lot more complicated to issue and govern, the governor stressed. The regulator would also have to put in place measures to prevent the abuse of such a currency, including thresholds on the amount of money that can be sent anonymously, he stated.

For the most part, the race to launch the first CBDC has been seen as just theoretical. However, the governor of the French central bank has revealed that there’s indeed a race, and France intends to win it.

The deputy director of the People’s Bank of China also previously confirmed that the Asian country also sees it as a race. Speaking during the Hong Kong Fintech Week, Mu Changchun stated:

“In the future, the process of digital currency issuance will be the way of horse racing, the leader will win the entire market; who is more efficient, who can better serve the public, who it will survive in the future; if a front-runner takes the lead in taking action, the technology they use will be adopted by other parties.”