France's central bank begins experimenting with digital euro

Quick Take

  • The central bank of France has launched an experimental program to test the integration of digital euro in settlement procedures
  • The central bank wants to identify the benefits of CBDC and analyze the effects of CBDC on financial stability and monetary policy.

The central bank of France has launched an experimental program to test the integration of digital euro in settlement procedures.

Announcing the news on Monday, the central bank said the program has a three-fold objective: to show how traditional interbank settlement can be carried out using central bank digital currency (CBDC), identify the benefits of CBDC, and analyze effects of CBDC on financial stability and monetary policy.

“The aim is to explore the potentialities offered by this technology, and to identify concrete cases integrating Central Bank Digital Currencies in innovative procedures for the clearing and settlement of tokenized financial assets,” said the central bank.

To that end, the central bank is calling for applications. Applicants must be established in the European Union or in a state party to the European Economic Area agreement, and their applications must include a proposal for an experiment covering at least one of these three use cases:

Payment by means of a token, representing central bank money, against 1. delivery of a listed or unlisted financial instrument; 2. against a digital currency of another central bank; and 3. against digital assets as defined by Article L. 54-10-1 2° of the French Monetary and Financial Code.

“The Banque de France will not engage in money creation in the context of these experiments. The token reflecting the amount in euros in digital form will be destroyed at the end of the accounting day on which payment was made,” said the central bank.