The French central bank’s blockchain-based CBDC pilot project for debt markets

The French central bank continues to actively investigate a central bank digital currency (CBDC), completing a major test of a blockchain-based CBDC in the country’s debt market.

More than 500 institutions in French participated in a 10-month trial to test CBDCs issued by the Banque de France for transactions in government bonds, the Financial Times reported on October 19.

The CBDC study is led by Belgian financial services company Euroclear and uses a system developed by US technology giant IBM.

The CBDC also took part in the French National Debt Office, along with the central bank and a consortium of large financial firms operating in France, including BNP Paribas, Crédit Agricole CIB, HSBC and Societe Genérale.

As part of the experiment, participants traded government bonds and security tokens and paid for them using a CBDC provided by the central bank. The project tested the use cases of CBDCs in a number of day-to-day operations, such as issuing new bonds, using them in repurchase agreements, and paying coupons and deals.

“Together we have successfully measured the inherent benefits of this technology and have concluded that central bank digital currencies are liquid,” said Isabelle Delorme, CEO of Euroclear.

According to Soren Mortensen, Global Director of Financial Markets at IBM, the project “goes beyond previous blockchain initiatives” as it has successfully tested “most central securities custody processes and central banks” while eliminating existing intermediate steps such as mediation between market brokers.

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After the start of the CBDC pilot program in March 2020, the French central bank continuously tested various CBDC use cases. In June, the Banque de France, in cooperation with the Swiss crypto bank SEBA, tested a CBDC to simulate the processing and distribution of listed securities. Previously, the central bank piloted the CBDC to issue simulated stocks valued at $ 2.4 million through a private blockchain platform.