Digital currencies issued by the central bank

The French central bank asked for proposals for applications for digital currencies issued by the central bank (CBDC). The projects would help the institution understand the risks and mechanisms associated with CBDCs. They can also help to study the idea of ​​digital money for the euro area.

The experiment will have three phases and aims to analyze three aspects regarding digital currencies. These refer to the design of the CBDC, the analysis of their impact and the execution of operations with the help of digital money.

The projects to be selected aim to cover a number of use cases. These include payment of financial instruments, transfers with other central banks and payment of digital assets. In the experiment, no money will be created, according to the French central bank. All transactions will take place in the bank’s internal registers, and the tokens will be destroyed at the end of each day.

Digital currencies issued by the central bank – Potential and technology

In addition, the project will examine the potential consequences of CBDC on market infrastructures, monetary policy, macroeconomic factors and legal frameworks.

The banque du France application does not include specifications regarding the technology to be used. Applications do not necessarily have to develop a blockchain-based CBDC, “but innovation is a selection criterion.”

To participate in the project, applicants must be “established” in the European Union. The French central bank will select 10 candidates and the deadline for submitting projects is July 10, 2020.

Banque de France has advocated for the adoption of advanced technologies for at least four years. The representatives of the institution frequently declared themselves in support of innovation.

“We, as central banks, must and want to accept this call for innovation at a time when private initiatives – especially payments between financial actors – and technologies are accelerating, and public and political demand is increasing,”

said François Villeroy de Galhau, governor of Banque de France, on December 4, 2019.