France Sees Merits in a Wholesale Central Bank Digital Currency

(Bloomberg) --

The Bank of France called for further research on a central bank digital currency for wholesale use in the financial sector after finding efficiency advantages for markets and payments.

Testing showed a CBDC could maintain standards for securities settlements and avoid potential fragmentation from the existence of multiple private versions, according to the bank. It could also make cross-border payments “faster, cheaper, more transparent and more inclusive,” it said in its first report since starting to look into the subject in 2020. 

The findings are part of a flurry of work by regulators seeking to keep up with the fast-pace development of crypto-assets and digital payments that’s been further fueled by the arrival of the world’s largest tech companies into the sector.

They come with some governments fretting that sovereignty over money and payments is at stake, and central banks worried about how they can anchor financial systems.

The French experiments into a wholesale digital currency complement a two-year research project by the European Central Bank into issuing a digital euro for retail. 

It’s still early days for the wholesale version. The Bank of France said more work is needed on how monetary policy and the economy would be affected by issuing a CBDC to more intermediaries. It said central banks should also assess the technology required for such a project, including its energy-efficiency and scalability. 

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