According to the Bank of France’s Governor, the central bank may implement a CBDC soon. However, the proposed asset is a wholesale CBDC.
The central banks and financial institutions would use the wholesale CBDC rather than the general public. Also, the central bank would use two innovative assets in the proposed CBDC.
They include automated market maker (AMM) and centralized DLT technologies. Meanwhile, the central bank said it may offer a “viable prototype” of the wholesale CBDC by 2023.
France Working On CBDC Development
By 2023, the French central bank hopes to have a Central Bank Digital Currency (CBDC) in use. The Governor of BoF, François Villeroy de Galhau stated this at the 2022 Paris Europlace International Financial Forum.
He stated that the BoF would test the central bank’s wholesale CBDC using a “viable prototype” in 2022. By 2023, the bank would put in place a European pilot system.
Also, financial entities would then utilize the asset in settlements. The system is geared toward financial institutions and central banks and will take key cues from blockchains and DeFi protocols.
BoF Working On Wholesale CBDC
In his address, Villeroy de Galhau distinguished between wholesale and retail CBDCs. According to Galhau, the central bank distributes a retail CBDC to the general population for everyday usage.
Conversely, only financial organizations that have reserve deposits with a central bank can use wholesale CBDCs.
“Retail CBDCs have been the subject of private queries and public enthusiasm as well as worries, among commercial banks,” added Galhau.
Meanwhile, Wholesale CBDCs, in comparison, have been less divisive. Also, they have given institutions more time to experiment with their usage and possible effects.
CBDC To Have Two Uses
According to the BoF, the wholesale CBDC would have two essential use cases. First, it would strengthen cross-currency and cross-border settlements. Next, it will help to tokenize assets.
Furthermore, the central bank has created two innovative assets as a result of its experiments. The first is a centralized blockchain that uses a proprietary DLT.
The second invention is an automated market maker (AMM). The AMM would provide central banks with a platform to settle transactions among various CBDCs. The DeFi markets inspired the AMM.
Last month, Fed Reserve Vice Chair Brainard talked about CBDC in the US. Brainard said the President and Congress would need to approve a retail CBDC. Even then, it would take at least five years to develop.