- The Bank of France invites interested parties to take part in an experiment to test the introduction of a central bank-based digital currency.
- Ethereum (ETH) and Ripple (XRP) are block chains that could help with the launch, according to the bank.
In a document published by the Bank of France, the financial institution reveals its efforts to keep pace with the race to issue a digital bank digital currency (CBDC). In the newly published document, the Bank of France invites all interested parties to participate in the research and possible use of a digital euro for the interbank settlement.
The aim of the project is to explore the limits and possibilities offered by the integration of a CBDC. Furthermore, the institution intends to identify specific use cases and test them in “innovative procedures” for the processing of payments and the possible tokenization of financial assets. The document states:
The challenge of these experiments is not to replace these two existing forms of central money, but to identify how innovative technologies could improve the efficiency and fluidity of payment systems and financial infrastructures, allowing a better financial sector to ensure the smooth financing of the economy.
Could Ethereum (ETH) and Ripple (XRP) drive the digital Euro?
The Bank of France stated that the results of the self-declared “experiment” are part of a contribution to the euro system. In addition to the above-mentioned objectives, the institution seeks to support the efforts of the Euro system and stresses that its experiment will be of limited duration. They are therefore leaving the entire development and implementation of the digital euro to the Euro system.
Thus, the experiment will be a small part of a wider testing and development programme. Those who wish to apply to participate in the experiment ask to submit their applications by 15 May 2020. Afterwards, there will then be a period of interviews and a selection period between June and July this year.
The test of a digital euro was announced by France as early as 2019, when the country was preparing to be one of the first in the European Union to test a digital euro. Moreover, a recent report revealed that the two blockchains, Ethereum (ETH) and Ripple (XRP) could be used to issue a CBDC. This could lead to a solution that would allow end-to-end transactions with tokenized central bank currencies in a blockchain. In this respect, the report states the following:
Since the attributes of a unit of the wholesale CBDC (file representing the currency unit, keys enabling use) may be integrated in a cryptoasset circulating on another blockchain, which is possible on Ethereum and Ripple, for example, it would then become possible to use the unit on this blockchain.
The wholesale CBDC unit could be exchanged via the secondary blockchain between entities not belonging to the digital currency’s formal circulation network.
Although the race for the first CBDC of a major economy seems to be on hold for now, as the world deals with the COVID 19 pandemic, the report of the Bank of France proves that the development of a CBDC remains a priority. However, it remains to be seen what the result of the test will be and whether it will lead to the issuance of a digital euro in the short or medium term.