On March 27, the Banque de France published a request for proposals for central bank digital currency “experiment” applications. These projects will help France’s central bank understand the risks and mechanisms of CBDCs and also contribute to the eurozone’s digital cash conversation.
France’s central bank wants to experiment with integrating digital currencies.
The call brings France to the front of that debate. It’s the highest-profile eurozone member to launch a CBDC experiment to date (Sweden, whose Riksbank is also toying with digitizing currency, uses the krona).
The Banque de France has advocated for experimental and advanced fintech projects for at least four years, sometimes hinting, through job postings and speeches that it was also eyeing development of a CBDC.
“We as central banks must and want to take up this call for innovation at a time when private initiatives – especially payments between financial players – and technologies are accelerating, and public and political demand is increasing”, François Villeroy de Galhau, Governor of the Banque de France, said in a Dec. 4 speech on CBDCs.
“Other countries have paved the way; it is now up to us to play our part, both ambitiously and methodically.”The three-phase experiment will shepherd selected projects through every aspect of CBDC issuance, from designing a digital currency to analyzing its impact and ultimately executing operations.
France’s project covers a trio of CBDC use cases: payment against financial instruments; payment against other central banks’ digital currency; and payment against digital assets. There will be no money creation, according to the bank. All exchanges will route across the bank’s own books with tokens destroyed at the end of each payment day.
Additionally, the project will examine CBDC’s potential consequences on market infrastructures, monetary policy, macroeconomic factors and legal and regulatory frameworks.
In the call the bank said it is technology neutral, meaning applicants need not necessarily develop a blockchain-based CBDC, “but innovativeness is a selection criterion.”
Applicants must “be established” in the European Union. Banque de France will select up to 10 candidates on July 10.
The project as outlined in documents indicates that the Banque de France will not necessarily issue a CBDC at the end of it all.
“Indeed, any decision to create a CBDC is a matter for the Eurosystem”, the bank said. “Consequently, the Banque de France does not intend to perpetuate or conduct such experiments on a widespread basis.”
Christine Lagarde, a former minister of the economy for France, is head of the European Central Bank. She’s advocated for the ECB to expand its role in developing CBDC since assuming the post last November.
French Central Bank Job Posting Reveals Digital Currency Program
The central bank of France, Banque de France, is seeking a blockchain analyst who will help the bank define a program for implementing digital currency.
In a job opening posted on October 16th and listed under the Financial Stability and Operations branch of the bank, the bank called for an analyst with experience in crypto-economics, game theory and public or private blockchain. The bank is also hiring a development engineer to study the application of blockchain to key banking functions. Banque de France declined to comment.
For the analyst position, the institution cited Quorum, Hyperledger and Corda as examples of private blockchain experience and the bitcoin and ethereum blockchains as examples of public blockchain experience.
The bank also wants the analyst to experiment with other blockchain specialists in the eurosystem, participate in blockchain proof-of-concepts within and outside the bank and identify economic issues related to how monetary policy is conducted.
Historically, Banque de France has been aggressively focused on blockchain and not bitcoin.
In December 2016, the bank ran a digital identity trial that tested using blockchain in the management of identification markers used to establish the identity of creditors within the Single Euro Payments Area. A few months after that trial, the bank’s governor announced that it would open a fintech innovation lab, which would include blockchain startups.
Despite its interest in the technology underlying bitcoin, the bank proposed banning insurance companies, bank companies and trust companies from touching crypto-assets in March 2018.
The bank’s position softened recently, however, with Denis Beau, a deputy governor of the bank, calling for a global regulatory framework on crypto-assets earlier this year.
