The Banque de France shares its experiences with wholesale central bank digital currencies (MNBC) using distributed ledger technologies (DLT). A wholesale CBDC is a digital currency issued by the central bank for settling payments between financial institutions, not everyday users.
They conducted twelve experiments, exploring three models for issuing MNBC on DLT: interoperability, distribution, and integration. The experiments, which started in March 2020, demonstrated the operational feasibility and practicality of these models, which offer different capabilities compared to conventional systems. It focused on tokenizing finance and enhancing cross-border transactions.
Over the three-year period, the bank collaborated with several European central banks, commercial banks, and partners in the fintech space.
According to the bank, issuing both retail and wholesale MNBCs contributes to the uniqueness of the currency, ensuring central bank money’s anchor value for both retail and wholesale payments and enabling convertibility between different forms of private money. It means that central banks can still control national currencies if wholesale and retail CBDCs are implemented.
It also added that collaboration between central banks and public-private partnerships is crucial to developing an inclusive framework for wholesale MNBCs as well as prioritizing interoperability between conventional and DLT-based infrastructures. This will ensure efficient data exchange and transactions, enhancing the overall functionality of wholesale MNBCs.
Other findings by the bank are that the design of wholesale MNBCs should incorporate energy-efficient solutions to address climate-related concerns; central banks can leverage DLT’s technological advancements to maintain control over the implementation and operation of wholesale MNBCs; and central banks should remain technologically neutral while actively contributing to the adoption of international standards to ensure consistency and compatibility.
Lastly, it added that DLT can enhance the automated processing of market and post-trade activities, contributing to overall financial stability and efficiency, and ongoing experimentation at national and international levels is essential to further analyze and develop an operational framework for wholesale MNBCs, adopting a learning-by-doing approach to refine their implementation.
Currently, there are more than 100 countries around the world experimenting with CBDCs, and over 40 have reached out to the IMF asking for assistance on how to implement these CBDCs.
