The Bank of France successfully piloted a central bank digital currency — or CBDC — experiment in December, using the technology to settle monetary fund shares on a private blockchain platform for the first time.
As announced by Le Banque de France on Jan. 19, the pilot commenced on Dec. 17, and saw 2 million euros ($2.4 million) worth of simulated shares purchased and sold by investors using a CBDC.
The pilot took place with distributed ledger technology provided by SETL — a UK-based regulated blockchain services provider, which also provided the CBDC stablecoin. SETL’s IZNEZ record-keeping platform was used to keep track of fund unit movements.
CBDCs are centrally-issued stablecoins created and overseen by the banks of a given country. Unlike cryptocurrency stablecoins such as Dai (DAI), CBDCs make no attempt at decentralization and are instead created with top-down oversight in mind.
The pressure on national governments and banking institutions to stay ahead of the spread of cryptocurrency stablecoins was on full display last week. On Jan. 15, Chairman of the United States Federal Reserve, Jerome Powell, told interviewers on Yahoo Finance that the creation of CBDCs was a “high priority”, and necessary to combat the spread of what he termed “bad private sector money”.
On Jan. 11, the Agricultural Bank of China released the first ATMs onto the streets of its Shenzen region for the transfer of digital yuan — China’s own CBDC, which pundits predict may be the first of the national digital currencies to come to fruition.
In Tuesday’s announcement, the Bank of France said the creation of a CBDC was an important step in being able to execute instant transactions while keeping complete track of what goes where. The announcement stated:
“From a technological point of view, the experiment required the development and deployment of smart contracts so that the Banque de France can issue and control the circulation of CBDC tokens and that their transfer takes place simultaneously with the delivery of the tokens of fund shares in the investors’ portfolio.”
Several other blockchain testing programs are apparently underway at the Bank of France, with some expected to run until mid-2021.