The first phase of experiments with a wholesale digital euro has concluded, and the second phase of experiments will start this year, Bank of France Governor François Villeroy de Galhau said on Tuesday. Four or five new experiments are expected to be launched.
In his speech at the Europlace International Financial Forum in Paris, the French central banker summarized the achievements of the European Union in terms of regulating crypto assets under the French presidency, mentioning the Regulation of Transfer Funds (Travel Rule) and Crypto Asset Markets (MiCA), specifically.
The Eurosystem is studying the scope and design of a central bank digital currency (CBDC) in euros. The main reason for a retail digital euro is to maintain the role of central bank money in the economy even when it is “threatened by the digital revolution”, continued Villeroy de Galhau. He spoke in favor of maximum brokerage in the design, noting that brokers have more experience than central banks in customer relations and know-your-customer/anti-money-laundering (KYC/AML) measures. Said:
“I think the Eurosystem should not have the role of managing digital euro holdings: the Banque de France closed its last private client accounts more than 20 years ago, and it has no intention of reopening any.”
The wholesale CBDC, which will be used for interbank transfers and other similar operations, will be no less important than the retail one, Villeroy de Galhau said. He cited the critical use cases of digital ledger technology (DLT) issued securities settlement and cross-border and cross-currency payments. The Banque de France designed its own digital ledger technology, called DL3S, for a possible future system. It also developed an automated market maker platform based on a decentralized financial model, where multi-CBDC settlements could take place.
The new experiments will consist of testing a digital euro prototype with private agents and other central banks, in preparation for the application of the pilot regime in 2023. Villeroy de Galhau highlighted the importance of interoperability between DLT and the traditional system. DLT will complement traditional infrastructure rather than replace it, he said.
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