On Tuesday, September 27, Villeroy de Galhau, Governor of the Banque de France, the Central Bank of France, announced two new projects that aim to realize the benefits of Central Bank Digital Currencies (CBDCs) used at the wholesale level by banks and financial entities. markets.

The governor made the announcement during his speech at the bank’s digital currency conference on Tuesday. The head of the Central Bank said that the first project will seek to improve the liquidity management of CBDCs in decentralized finance (DeFi), for example through automated market makers. As a creator of liquidity, the CBDC will play a role similar to that of investment banks in supporting the trading of certain securities.

On the other hand, the second project will focus on the issuance and distribution of tokenized bonds on a blockchain. This will build on previous findings on the use of CBDCs to settle Web3 securities, such as the French Central Bank’s Project Jura.

In his speech, the governor stated that: “A wholesale CBDC could significantly contribute to improving cross-border and cross-currency payments.” But then he acknowledged that: “CBDCs at the wholesale level attract less attention than their headline-grabbing retail equivalent.”

The governor promised to add more details about the new projects in the coming weeks. A point to remember is that France’s wholesale CBDC is currently in the second stage of the experimentation program, in which four or five new projects will be presented.

Stepping Up CBDC Efforts

In July this year, the French Central Bank began the second phase of experimentation with its wholesale CBDC, designed to streamline domestic and cross-border transactions between commercial banks.

The Central Bank of France wants to bring CBDC as a settlement asset as early as 2023. The bank is working to get closer to a viable prototype, testing it in practice with more private financial institutions and foreign central banks in the second half of 2022 and 2023.

Banque de France, which began experimenting with a wholesale CBDC in March 2020, completed its first stage of experimentation in December 2021. During the experimentation period, the bank had been exploring the use of CBDC for the exchange of money between financial institutions.

In addition to wholesale CBDC, the Banque de France is also exploring a retail CBDC as part of the European Central Bank’s broader work on the potential development of a digital euro.

Central banks around the world are exploring the development of digital currencies not only to address the decline in the use of cash, but also to address the growing interest in private cryptocurrencies among users.

Central banks are increasingly exploring wholesale CBDCs that are based on blockchain technology and promise to help speed up interbank settlements.

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