From March 2020 to the end of last year, the French Central Bank conducted nine experiments that helped demonstrate how CBDCs could be used for wholesale payments. These involved cross-border and cross-currency payments as well as the settlement of securities.

A year ago, simulations were started by the Monetary Authority of Singapore and Banque de France to fully understand the real potential of digital money.

The experiment, although limited to two Central Banks, showed that the network design could be scaled to support the participation of multiple central banks and commercial banks located in different jurisdictions.

One year on, the French Central Bank has stated that the first phase of the digital euro experiment has been completed and that the second will begin this year.

In addition to an automated market maker platform, inspired by the DeFi markets, the central bank has developed its own distributed ledger technology (DLT), which is expected to serve as the basis for a multi-CBDC platform:

“This work guarantees that we are ready to bring the European Central Bank’s currency as a settlement asset as early as 2023, with the implementation of the European pilot scheme,” said French Central Bank President Galhau: “This pilot scheme will provide a regulatory framework to support the trend towards tokenization of financial assets,” he concluded.

Europe is working on the design of a central bank digital euro (CBDC).

The main motivation is to maintain the role of central bank money in the economy, even if ‘threatened by the digital revolution’, de Galhau continued.

He advocated maximum cooperation during the design process, with the involvement of multiple intermediaries to utilise their expertise in customer relations and Know Your Customer/Anti-Money Laundering measures.

The recommendations of the Bank for International Settlements, which has long been calling on states to equip themselves with a digital state currency, have been taken up in Europe, especially by France, which is currently the most advanced European country in digital currency design.