French central bank pilots blockchain-based CBDC for the debt market

The Central Bank of France is actively exploring a central bank digital currency (CBDC), which completes a significant trial of a blockchain-based CBDC in the country’s debt market.

The Financial Times 1 reported in October that more than 500 French institutions took part in the 10-month CBDC exam issued by Bank de France.

The CBDC trial was conducted by Belgium-based financial services firm Euroclair and used a system developed by American technology giant IBM. The CBDC exam involves the Central Bank as well as the French Public Debt Office and a consortium of major financial companies operating in France, including BNP Paribas, Credit Agricole CIB, HSBC and Société Générale.

As part of the trial, participants sold government bonds and security tokens, disposing of them using CBDCs provided by the central bank. The project is tested for use in the day-to-day operations of a CBDC, such as issuing new bonds, using them in repurchase agreements, as well as issuing coupons and redeeming contracts.

“Together we have been able to successfully measure the inherent advantages of this technology, concluding that the central bank’s digital currencies can dispose of central bank money safely and securely,” said Isabel DeLorme, executive at Euroclair.

According to Soren Mortensen, IBM’s global director of financial markets, the project “advanced better than previous blockchain initiatives” because it successfully “tested most central securities depository and central bank processes” while closing existing intermediate measures such as reconciliation between market intermediaries.

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Since launching a pilot CBDC program in March 2020, the Central Bank of France has been continuously testing various CBDC uses. In June, Bank de France conducted a CBDC test in imitation of the settlement and distribution of listed securities in collaboration with the Swiss cryptocurrency bank SEBA. Previously, the central bank operated a CBDC to issue simulated shares worth $ 2.4 million using a private blockchain platform.