The vision of French Central Bank evokes a promising future with its wholesale central bank digital currency (wCBDC), augmented by advanced cryptotechnologies. Following various trials, the organization pronounced on Friday that the digital innovation could notably enhance the safety, settlement certainty and efficiency of cross-border transactions alongside a wide array of financial assets.
Specifically, the bank validated the practical applicability and operational feasibility of three paradigms it developed for issue of wCBDC relying directly on distributed ledger technology (DLT). Diverse versions of DLT have been practically tested on multiple applications, from tokenization of assets to making cross-border transactions more seamless.
March 2020 marked the initiation of experimental phases on a wCBDC by the French institution. Gradually, twelve experiments were executed by mid-2022, encompassing a noteworthy one that dealt with a bond settlement worth $104 million with Luxembourg. Other experimental initiatives involved collaboration with the Monetary Authority of Singapore, the Swiss National Bank, and the Innovation Hub of the Bank for International Settlements (BIS).
It is worth noting that these testing phases demonstrate how vital a wholesale CBDC could be for native digital and tokenized assets that fall under unlisted financial assets and cannot be settled as per current scenarios.
Many international central banks are actively trialing CBDCs to optimize wholesale settlements, with monetary body conglomerate BIS leading multiple initiatives. India has started similar explorations, while the European Central Bank anticipates launching its venture in 2024. The French central bank pledges its support to Europe’s exploratory work as one of its next actions.
One of the noteworthy policy inferences was the observation that a wholesale CBDC would enhance retail CBDCs like a digital euro. Compatibility for seamless data exchange, international engagement and public-private partnerships for a more comprehensive global CBDC system are also critical priorities.
Nonetheless, a nuance related to energy consumption comes into the picture with the bank noting, “climate concerns highlight the need to develop energy-efficient solutions in the design of wholesale CBDCs.” Even as digital currencies propel us into an era of seamless transactions and enhanced financial security, how this momentum can be balanced with global sustainability goals remains a question for contemplation.
Source: Coindesk
