The central bank of France recently successfully completed a significant test run of a blockchain-based CBDC (central bank digital currency) in the country’s debt market.
As the Banque de France continues actively exploring CBDC, more than 500 institutions in France have participated in a 10-month pilot testing a french CBDC for government bond deals. The trial is part of a wider Banque de France initiative commissioned in March 2020, to test the integration of a CBDC using innovative procedures for the exchange and settlement of tokenised financial assets between financial intermediaries. Apart from its role as architect of the CBDC experiment programme, Banque de France participated in the experiment, acting as the Central Bank issuing and distributing the CBDC.
Led by Belgium-based financial services firm Euroclear, a group of France’s largest financial market participants, used a system developed by U.S. based IBM to execute the transactions.
According to a report published on Euroclear’s website, almost 500 instructions in both primary and secondary markets were executed. Crédit Agricole CIB, BNP Paribas, Societe Generale, and HSBC, made up the consortium.
The CBDC trial is one of the EU’s largest to date. The trial members traded government bonds and security tokens, settling them using a CBDC issued by the central bank. The test also looked for use cases of a CBDC in a range of everyday activities, like issuing new bonds, using CDBC in repurchase agreements, and paying coupons and redeeming deals.
"The objective of the experiment was to assess if a wide range of operations and functionalities can be run on a blockchain platform and identify, from a user point of view, the added value of blockchain technology." wrote Euroclear.
Euroclear said that the experiment showed that CBDC can be effectively used to support the settlement of securities in central bank money. The trial also demonstrated that it is possible to run post-trade operations for an activity as critical for the capital markets as the management of OATs.
According to the report published by Euroclear permissioned blockchain approach will allow participants to benefit from blockchain features while ensuring market operators i.e. CSD and Central Banks, can continue to run the required controls.
