The Banque de France is behind a pioneering experimentation programme
It is for these reasons that the Banque de France launched an ambitious wholesale CBDC experimentation programme in 2020. The Banque de France was one of the first central banks to initiate experiments as part of a learning-by-doing approach. This programme, conducted in partnership with public and private market players – including banks, central banks, fintechs and technology providers – explores various different use cases across a wide range of assets, using a variety of technologies, within a national as well as a cross-border framework, potentially involving a number of CBDCs.
It has given Banque de France teams a better understanding of how DLT works and the potential benefits for financial markets. The European regulation setting up a pilot programme, which came into force in March 2023, will make it possible to continue these experiments within a simplified regulatory framework.
A strategic reflection process backed by many central banks around the world
The Banque de France is not alone in tackling these issues. Successive reports from the BIS have highlighted central banks’ growing interest in CBDC – 93% are currently looking into the possibilities offered by issuing CBDC. The BIS itself sees this as an opportunity to improve cross-border payments. At present, cross-border payments are settled using the correspondent banking model, which involves a large number of intermediaries, making settlement a time-consuming and costly process. Based on this observation, the BIS and the Banque de France have teamed up to work on two experimental projects, Jura and Mariana, with the aim of improving cross-border payments by using several CBDCs within interoperable systems. Naturally, to actually improve cross-border payments, putting such systems into production would require extensive international cooperation.
In the wake of this reflection process, on 28 April 2023, the European Central Bank (ECB) also announced exploratory work on the settlement of tokenised financial assets in central bank money, which could begin as early as 2024. The aim of this exploratory work is to test different wholesale CBDC solutions, including DLT-based ones, to gain a better understanding of how these solutions could facilitate interaction between TARGET services and distributed ledger technologies. To do this, the Eurosystem regularly liaises with the industry via a Market Contact Group that provides input for the Eurosystem's strategic reflections on the use of DLT and all new technologies on the financial markets.