France is once again front-running the EU in digital currency matters as the Bank of France gets ready to run central bank digital currency (CBDC) experiments.
With China’s accelerated CBDC development, stakeholders in other major economies are calling for their respective central banks to begin developing sovereign CBDCs asap. More than a dozen countries are actively creating their own digital fiat alternative.
Amid the growing CBDC ‘arms race’ comes the question: how well will these projects fare in the international scene? Apart from interbank settlements, digital currencies may find little cross-border use-case unless the countries have significant international ties.
France Front-running EU in CBDC Development
According to a communique published on Monday, the Bank of France has selected eight financial institutions as part of a series of tests for its central bank digital money (MDBC) experiments. The central bank chose the participants from a pool of applications received back in mid-May.
Among the chosen are Seba Bank, Societe Generale, ProsperUS, and HSBC. Others include Accenture, Euroclear, Iznes, and LiquidShare. According to the central bank’s press release, each chosen candidate proposed experiments that will test CBDC suitability in settling financial asset transactions.
The participating institutions also reportedly proposed channels for developing robust CBDC cross-border transfer corridors as well as efficient distribution of a future sovereign digital currency.
The experiments will begin within the next few days as the central bank works closely with each chosen participant. Commenting on its future plans, a spokesperson for the French central bank declared:
“The lessons learned from these experiments will constitute a direct contribution to the more global reflection conducted by the Eurosystem on the benefits of a central bank digital currency. These experiments also illustrate the Banque de France’s commitment to innovation.”
Similar tests that are ongoing in other EU member nations like Germany, Sweden, and The Netherlands may combine to form an aggregated CBDC policy for the region.
A sovereign digital currency issued by the European Central Bank (ECB) does appear to have some superiority over the projects under development in several other countries, at least on paper.
Not all Sovereign Digital Currencies Will Prosper
As previously reported by BeInCrypto, China is strongly pushing its digital currency electronic payment (DCEP) solution for international transactions. Indeed, the country’s CBDC likely factors heavily into the $1 trillion Belt and Road initiative which already has over 70 partner countries.
China’s growing influence on the international stage, especially among emerging nations, provides a base layer to push its CBDC towards significant cross-border use.
Apart from the U.S. and the EU, China appears to be the only other economic bloc capable of issuing an internationally recognized sovereign digital currency project.
Under the aegis of the EU and the European Economic Area (EEA), the European Central Bank (ECB) can ensure international adoption of a future digital Euro.
With many countries developing their own CBDCs, the pathway for interoperability among these many sovereign variants appears unclear. In the end, CBDC systems may only provide robust interbank settlement capabilities that leverage blockchain tech.
For now, countries like Japan and South Korea say they have no intention of creating a CBDC. However, these declarations have not stopped them from developing and testing research protocols for sovereign digital currency-related issues.