France being part of the Euro region, Banque de France participates actively in the digital euro development.
France also conducted few experiments in the wholesale CBDC area.
1.) Settling digital bonds with CBDC
The experiment on the use of Central Bank Digital Currency (CBDC) for settling digital bonds was conducted in cooperation with the members of a banking syndicate composed of Goldman Sachs International, Santander, Société Générale, European Investment Bank and Banque de France in April 2021.
The trial involved investors subscribing to digital bonds issued by the European Investment Bank (EIB), totaling 100 million euros. The settlement of funds was facilitated through Central Bank Digital Currency (CBDC) issued on a blockchain.
From a technological perspective, the experiment necessitated the creation and implementation of secure smart contracts. These contracts allowed the Banque de France to issue and oversee the circulation of CBDC tokens, ensuring that the transfer of CBDCs coincided with the delivery of securities tokens to the investors’ portfolios. This process followed a Delivery versus Payment approach.
The experiment demonstrated how central banks can incorporate their most secure and liquid settlement asset into innovative trading procedures within financial markets. This integration guarantees maximum security for both issuers and investors.
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2.) Venus initiative — Wholesale CBDC
The Venus initiative comprised of Banque de France, Banque centrale du Luxembourg, Goldman Sachs Bank Europe S.E., Santander, Societe Generale and European Investment Bank (EIB). It involved providing a safe settlement asset in the form of a tokenised representation of euro central bank money that can be described as an experimental Central Bank Digital Currency (CBDC).
A digital native bond worth 100 million Euros issued by the European Investment Bank under Luxembourg law, was settled using a tokenised representation of euro central bank money.
The EIB digital bond, specifically designed for digital platforms, was created and recorded on a controlled Distributed Ledger Technology (DLT). Subscriptions to the bond were settled using experimental CBDC tokens on a separate controlled DLT jointly operated by the Banque de France and the Banque centrale du Luxembourg. This endeavor involved the development and implementation of a reliable messaging system between DLTs, which included a Hashed Time lock Contract (HTLC) protocol. This mechanism allowed for the simultaneous transfer of experimental CBDC tokens and delivery of the digital bond on the same day it was issued.
The demonstration highlighted the potential for issuing, distributing, and settling digital assets within the Eurozone in a single day.
Source:
https://www.bcl.lu/en/publications/Blog/Blog-22/index.html
3.) Project Mariana – FX settlement with wCBDC
Project Mariana represents an expansion of prior experiments conducted with wCBDCs, aimed at enhancing the efficiency, safety, and transparency of FX trading and settlement. It is a collaborative proof of concept (PoC) involving the BIS Innovation Hub, Bank of France, Monetary Authority of Singapore, and Swiss National Bank.
The project builds upon past experimental endeavors in three key dimensions, drawing inspiration from emerging decentralized finance (DeFi) technology.
- Within this initiative, the focus is on joint trading and settlement in wCBDCs utilizing an automated market-maker (AMM). This marks an evolution from previous cross-border wCBDC projects that concentrated solely on settlement. AMMs are smart contracts that leverage liquidity pools to automatically swap tokenized assets, contrasting with the traditional method of matching buyers and sellers via limit order books.
2. Project Mariana evaluates a shared standard for fungible wCBDC tokens, incorporating design elements aligned with central bank prerequisites. This standardized technical framework enables (i) compatibility among various wCBDCs within the same protocol, particularly the AMM, and (ii) the implementation of governance mechanisms at the token level without the need to exert control over the underlying platform or rely on a third-party platform operator.
3. The project also explores the mobility of assets across diverse blockchain-based networks through bridges, expanding upon previous initiatives that tested wCBDCs.
It’s crucial to emphasize that the project is purely experimental and should not be interpreted as an indication that any of the participating central banks have intentions to issue CBDCs or endorse DeFi or any specific technological solution.
Project Mariana is primarily centered on an experimental setup that focuses on FX spot trading and settlement utilizing hypothetical euro (EUR), Swiss franc (CHF), and Singapore dollar (SGD) wCBDCs, involving both commercial banks and central banks. More specifically, it investigates the viability of establishing an international FX interbank market using wCBDCs on a blockchain-based network. This network is interconnected with domestic platforms through bridges to facilitate the transfer of wCBDCs.
The project is still on-going and the final report is expected to be published by end of 2023.
Source:
https://www.bis.org/publ/othp_mariana.pdf
4.) Project Jura – Cross border settlement
Project Jura represents a collaborative effort involving multiple stakeholders, including Banque de France, the BIS Innovation Hub Swiss Centre, Swiss National Bank, and a private sector consortium.
The project focused on exploring cross-border settlement using wCBDCs denominated in euros and Swiss francs, along with a tokenized French financial instrument hosted on a third-party DLT-based platform. The primary objective was to facilitate payment-versus-payment (PvP) and delivery-versus-payment (DvP) settlements between French and Swiss banks while investigating ways to extend the safety and security of central bank-backed money across international borders.
This experiment introduced a novel architecture that may instill confidence in central banks to issue wCBDCs on foreign third-party platforms and grant non-resident financial institutions access to wCBDCs. By enabling various wCBDCs to coexist on a single platform, it allows for direct cross-border payments between financial institutions. Furthermore, the inclusion of other tokenized assets creates fresh opportunities for cross-border settlement involving FX, securities, and other financial instruments.
Importantly, this experiment was conducted in a near-real environment, involving real-value transactions and strict adherence to prevailing regulatory requirements.
Corda, developed by R3, was selected as the underlying permissioned DLT technical platform for the SDX (SIX Digital Exchange, a licensed exchange and CSD for tokenized assets) platform and the DAR (Digital Asset Registry, a new DLT-based registry for tokenized commercial papers issued under French law). Corda operates on a decentralized peer-to-peer network of computer nodes and follows a need-to-know principle, with data shared exclusively among transaction counterparties.
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