Banque de France calls for applications for digital euro experiment
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Banque de France calls for applications for digital euro experiment 01 April 2020Paris Reporter: Maddie Saghir
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The Banque de France is calling for applications to experiment with the use of digital euro issued for interbank settlements.
According to the bank, the aim of this initiative is to explore the potentialities offered by technology and identify concrete cases integrating central bank digital currency (CBDC) in innovative procedures for the clearing and settlement of tokenised financial assets.
The bank suggested that the experiments are not set to replace the two existing forms of central money, banknotes and coins.
It explained that the experiment is to identify how innovative technologies could improve the efficiency and fluidity of payment systems and financial infrastructures, allowing a better financial sector to ensure the “smooth financing of the economy”.
The experimentation has a threefold objective, including showing how "traditional" interbank settlement could be carried out using CBDC based on different technologies.
Additionally, the experiment is set to identify the benefits of CBDC for the current ecosystem of market and payment infrastructures, such as productivity gains, and understand how CBDC could foster financial innovation.
Another objective is to analyse what the effects of introducing a CBDC would be on financial stability, monetary policy and the regulatory environment.
The bank commented: “The results of these experiments will be a key element of the Banque de France’s contribution to a broader reflection conducted by the Eurosystem on the potential implementations of a CBDC. 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.”
However, on this point, Richard Byworth, CEO of Diginex, noted that a “Eurozone CBDC solution may not be such a remote possibility, with Christine Lagarde, an advocate for CBDC exploration taking the helm as head of the European Central Bank in November of last year.”
Speaking on the developments at the Banque de France, Byworth added: “These developments clearly signify France’s ambition to establish itself as a central player in the fintech and digital economy race, and as the highest-profile Eurozone member to launch a CBDC request for proposal, it is certainly in good stead for this.”
The concept of CBDC has been percolating within the walls of central banks across the world for some time, according to Byworth, but the Bank of England and Banque de France are both yet to explicitly specify whether they envisage employing decentralised ledger technology in their prospective efforts.
Byworth noted: “Up until now, the implementation of a CBDC was perceived as something interesting to explore with much theoretical potential, and northward of 50 nations have announced their active investigation of the concept, with some rolling out pilots and filing patents.”
He added: “Indeed, a study by the Bank for International Settlements found that 80 percent of central banks are engaged in some form of CBDC work, with 10 percent expecting to issue their own within three years. At present, central-bank issued money can only be held in the form of coins and notes. A CBDC could be designed to function as a new form of money, issued by the central bank and interchangeable with current forms, which would offer citizens and businesses a new mode of receiving and sending payments.”
The submission deadline for digital applications is 15 May 2020 at 3pm and the selection of applications will be 10 July 2020.
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