A strategic reflection process backed by the ECB and many central banks around the world
The key takeaways and learnings from the wholesale CBDC experimentation programme of the Banque de France are featured in a report published on 21 July 2023. The Banque de France is not alone in tackling these issues. Successive reports from the BIS have highlighted central banks’ growing interest in CBDC – 93% are currently looking into the possibilities offered by issuing CBDC. The BIS itself sees this as an opportunity to improve cross-border payments. At present, cross-border payments are settled using the correspondent banking model, which involves a large number of intermediaries, making settlement a time-consuming and costly process. Based on this observation, the BIS and the Banque de France have carried out two experimental projects, Jura and Mariana, with the aim of improving cross-border payments by using several CBDCs within interoperable systems. Naturally, to actually improve cross-border payments, putting such systems into production would require extensive international cooperation.
In the wake of this reflection process, on 13 December 2023, the European Central Bank (ECB) published a call for expressions of interest to participate in exploratory work on the settlement in central bank money of tokenised financial assets from May to November 2024. The aim of this exploratory work is to test different wholesale cetral bank money settlement solutions, including on distributed technologies (DLTs), to gain a better understanding of how these solutions could facilitate interaction between TARGET services and DLT.
Three Eurosystem interoperability-based solutions are proposed as part of these exploratory works, among which the “Full-DLT Interoperability” solution developed by the Banque de France. In this wholesale experimental CBDC solution, central bank money is issued in the form of tokens (“Exploratory Cash Tokens”) circulating on a DLT platform (“DL3S”). It is interconnected with a Market DLT, from which transactions with tokenised financial instruments trigger payments in central bank money.
In addition, the Eurosystem regularly liaises with the industry via a Market Contact Group (NTW-Contact Group) that provides input for the Eurosystem's strategic reflections on the use of DLT and all new technologies on the financial markets.