The French central bank (Banque de France (BdF)) aims to identify concrete cases integrating central bank digital currencies (CBDCs) in innovative procedures for the clearing and settlement of tokenised financial assets between financial intermediaries. The project, which will cover three use cases as well as the potential consequences of introducing a CBDC for market infrastructures, will form part as the bank's contribution to a broader discussion within the Eurosystem in respect of CBDCs.
What has happened
The BdF has published a call for applications to experiment with a CBDC for interbank settlements.
What does this mean
The BdF explained that the experiments will act as its contribution to a broader discussion within the Eurosystem, which will decide whether to set up a CBDC.
The BdF said that the project has three objectives:
- to show how conventional use cases for central bank money can be achieved through a CBDC based on different technologies;
- identify the benefits of introducing a CBDC for the current ecosystem and understand how one could foster financial innovation; and
- analysis the potential effects of introducing a CBDC on financial stability, monetary policy and the regulatory environment.
The experiments will cover the following use cases, namely payment in central bank money against: delivery of listed or unlisted financial instruments; the digital currency of another central bank; and digital assets.
The BdF will also assess the potential consequences of introducing a CBDC for the market infrastructures ecosystem, as well as analyse the macroeconomic, monetary, financial and legal consequences of introducing a CBDC.
The central bank said that it was not imposing any technology choices but that "innovativeness" is a selection criteria.
In terms of some of the other eligibility criteria, applicants must be established in the EU or the EEA and applications must include a proposal for an experiment covering at least one the three use cases.
The BdF said that the experiments should enable an initial assessment to be made of:
- the possibilities for developing transactions relating to financial assets, including existing financial instruments as well as new assets, on the basis of new technologies;
- the potential consequences for trading volumes and the intraday distribution of trading on the intraday money market, notably owing to the 24/24 availability of the CBDC;
- the impact on monetary policy transmission; and
- possible restrictions imposed by the existing legal and regulatory framework.
Applications must be submitted, in either French or English, by 15 May and the BdF will announce the winning applications on 10 July, with a view to having contracts signed by 13 July.
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