The French Central Bank, the Banque de France has unveiled the results of extensive testing involving wholesale Central Bank Digital Currency (wCBDC).
Twelve different experiments that were conducted over the course of three years in cooperation with several European central banks, commercial banks, and fintech partners made up the experiment.
It aimed to evaluate several wCBDC issuance models and comprehend the potential effects of these digital currencies on various facets of the financial system.
A central bank-issued digital ban known as a “wCBDC” is designed to settle high-volume transactions between financial institutions. The tests produced a number of important conclusions that addressed both the policy and technical facets of wCBDC implementation.
According to Bank de France, releasing a wCBDC in addition to a retail CBDC, which retail consumers can use for smaller-scale transactions, could guarantee that the value of publicly issued digital currency is protected for both retail and wholesale payments.
They also emphasized how important it is to construct wholesale CBDCs with energy-efficient solutions to address environmental concerns. From a technical standpoint, the Banque de France observed that while supporting technological neutrality and embracing common standards, blockchain improvements allow central banks multiple ways to preserve control over their wholesale CBDC systems.
Utilizing blockchain technology could improve the straight-through processing of trade and post-trade activities and help to overall financial stability.
Additionally, the experiments showed that tokenizing central bank funds might dramatically increase cross-border payments and settlement security for various financial instruments, from government bonds to fund shares.
The bank’s testing of its Distributed Ledger for Securities Settlement System (DL3S) blockchain was another innovative component of its work.
The bank investigated employing an automated market maker (AMM) to maximize wCBDC liquidity using a common shared platform in another trial run in partnership with the Swiss National Bank (SNB) and the Monetary Authority of Singapore (MAS).
These findings are noteworthy because they might shed light on the advantages, difficulties, and future uses of wholesale CBDCs on blockchain platforms.
They are also anticipated to contribute to the ongoing study of CBDCs and the development of the financial ecosystem in which they operate. The method taken by the Banque de France completes recent conceptual work on cross-border payments by the International Monetary Fund (IMF) and the Bank for International Settlements (BIS).
While the BIS is imagining a single ledger for all kinds of tokenized assets, the IMF has been investigating using blockchain technologies to ease international payments and currency exchanges.
