Project Leonidas update: Italian banks complete wholesale CBDC trial

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The Italian Banking Association (ABI) has successfully completed a trial for the issuance of a central bank digital currency (CBDC) in a distributed ledger technology (DLT) environment. Dubbed Project Leonidas, it focused on interbank settlements, with atomicity, traceability and transparency cited as the major benefits.

The ABI recently published a report on Project Leonidas, revealing it had partnered with 17 Italian banks on the trial. Japanese IT firm NTT Data (NASDAQ: NTTDF), which has participated in previous Italian CBDC trials, also joined the latest pilot alongside blockchain firm R3 and Milano Hub, the Bank of Italy’s innovation center.

Project Leonidas launched last June and lasted six months. It built on the success of Spunta Banca, an ABI-implemented DLT CBDC solution involving over 100 banks.

The ABI aimed to simulate the settling of liquid balances through a wholesale CBDC (wCBDC) issued on the ABILabChain, a DLT network designed by the association.

“The inherent benefits arising from both use cases are manifold, including the atomicity of exchanges, intrinsic transparency, and information traceability,” ABI revealed.

Programmability also emerged as a crucial factor—it allowed for increased automation in “end-to-end process management while maintaining the central role of humans (always prioritizing the operator’s intent over that of the machine).”

The ABI acknowledged that its project borrowed heavily from the work done by the Banque de France, specifically on the integration models. The French central bank published a report in 2023 that outlined the three wholesale CBDC models: integration, distribution and interoperability.

The ABI relied on the integration model in which the CBDC and the other tokenized assets are issued on the same platform.

Some aspects were also borrowed from the other models; for instance, in its Cash in Transit test, the association implemented the interoperability model, which has two separate DLTs, one holding the CBDC and the other holding the tokenized assets. The challenge with this model is ensuring that changes in both ledgers are simultaneous, which makes atomicity an essential requirement.

“The application of new technologies should not merely overlay onto existing processes; instead, it should drive a fundamental transformation of processes through the integration of innovative technologies,” the ABI concluded.

“With a wCBDC based on DLT, this transformation extends seamlessly from the reconciliation activities to the settlement phase.”

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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