French central bank to explore wholesale CBDCs and utility of token bonds

The Banque de France has hinted that it will pay particular attention to the development of a central bank digital currency (CBDC). In particular, Villeroy de Galhau, the bank’s governor, revealed that it would explore the benefits of a wholesale CBDC.

“A wholesale CBDC could make a significant contribution to improving cross-border and cross-border payments,” Galhau said during a conference on the direction of a potential CBDC. The head of the banking regulator added that retail CBDCs have gotten all the attention from the wholesale versions, but says both offer immense economic benefits.

Wholesale CBDCs refer to interbank wire transfer settlement, and its proponents say it could improve the efficiency of securities payments and settlement and reduce liquidity risk and counterparty credit. On the other hand, retail CBDCs are typically issued to the general public, on distributed ledger technology, and may offer interest rates to users.

Besides examining the benefits of wholesale CBDCs, Galhau notes that the central bank is looking to improve liquidity management of CBDCs in decentralized finance (DeFi) using automated market makers (AMMs). He adds that this would see it play the equivalent role to investment banks, supporting the trading of a security.

The governor also revealed a project that focuses on issuing and distributing tokenized bonds on a blockchain following the development of Project Jura, a CBDC pilot recently completed by the French and Swiss central banks in collaboration with the Hub. Innovation from the Bank for International Settlements (BIS).

Follow the example of the European Central Bank

France’s attempts to develop CBDCs rely on the efforts of the European Central Bank (ECB). The regional bank is currently conducting a public inquiry to determine the feasibility of digitizing the euro, with experts eyeing 2026 as a potential launch date.

There are several speculations about what the digital euro might look like when launched, but information remains scarce at the time of writing. However, ECB Director Christine Lagarde said the digital euro will not be designed to replace cash; rather, it will be designed to complement it.

The CBDC will be released on two fronts, both wholesale and retail, with the ECB noting that privacy and power consumption will take priority.

“We will also strive to achieve the highest standards of privacy and aim to contribute to financial inclusion and foster digital innovation, including with respect to payment programmability,” said Fabio Panetta, Member of the Executive Board of the ECB.

“In terms of implementation, we strive to minimize the time to market, costs, risks and environmental footprint associated with the digital euro,” he added.

Watch: The presentation of the BSV Global Blockchain Convention, CBDC and BSV

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