French central bank ‘Banque de France’ announced some of the results of its experiments with wholesale Central Bank Digital Currencies. Since its launch in March 2020, the bank has carried out a total of nine experimental projects, out of which seven have been concluded.
The report noted that while wholesale CBDCs have several benefits, they still require further research and examination following the results of initial trials. The bank called for full control over a wholesale CBDC if and when it would enter circulation.
CBDCs are divided into two categories, wholesale CBDCs and retail CBDCs. Wholesale CBDCs are used to make payments between financial institutions whereas retail CBDCs are used by consumers to purchase products on a daily basis.
In this case, the central bank has focused on wholesale CBDCs with a focus on exchange and settlement of financial assets based on new technologies such as DLT.
Nathalie Aufauvre, head of Financial Stabilization and Operations of the French Central Bank, commented:
“With the emergence of financial assets in tokenised form, we have shown that a CBDC, combined with the potential of new technologies, can ensure the safe settlement of transactions in these assets and thereby contribute to the secure development of these innovations.”
Aufauvre further added that CBDCs would be beneficial for cross-border and cross-currency payments “as it would improve the efficiency of processing chains”.
On the other hand, the bank said that it still needs to explore some of the issues that have emerged during the trials. For instance, if the CBDCs are available to a large number of market participants, it may have a large impact on macroeconomic and monetary policy, an issue that needs to be addressed.