The Banque of France will begin testing a Central Bank Digital Currency (or CBDC) in 2020, according to a report in Les Echos – the leading business publication of France.
Quoting François Villeroy de Galhau, the Governor of the Banque of France, who was speaking at a conference of the Autorité de Contrôle Prudentiel et de Résolution (ACPR). The official explained:
“We intend to start experimenting quickly and launch a call for projects (for private sector players) by the end of the first quarter of 2020.”
Understandably, the test will be reserved for financial institutions.
France is not alone in its interest regarding a digital Euro or other fiat currency. China is queuing up a project that may launch within weeks that is expected to be based, in part, on blockchain technology.
Many central banks have reviewed, or are reviewing, the possibility of a CBDC.
The current Bank of England Governor Mark Carney has proposed the creation of a “Synthetic Hegemonic Currency” (or SHC) governed by the public sector and backed by multiple central bank digital currencies. Carney believes that an SHC digital currency could potentially replace the US dollar as the leading reserve currency.
The Central Bank of Canada and the Monetary Authority of Singapore (MAS) have successfully tested cross border payments using blockchain tech. The two central banks claimed this was the first test anywhere of its kind stating it has “great potential to increase efficiencies and reduce risks for cross-border payments.”
This past September, Benoît Cœuré, the outgoing European Central Bank Executive Board Member, who will soon lead the Bank for International Settlements Innovation Hub, called the emergence of Libra a “wake up call for central banks and policymakers.” Cœuré is expected to pursue a deep dive into CBDCs and stablecoins in his new role.
While Facebook’s Libra may end up being an epic flop as governments are leary about a non-sovereign global currency created by a social media platform, the concept has caught the eye of bankers and economists around the world. Facebook pitched Libra as a global currency designed to remove intrinsic friction in the payments and transfer process benefitting the underbanked while cutting payment fees – an idea that has merit.
Central banks have a tendency to move with caution as there can be many unknowns in changing a currency market that has been in place for many decades, but change is definitely coming as to how Euros, Dollars, Yuan etc. flow around the world.