The Bank of France and the Swiss National Bank will trial central bank digital currencies (CBDC) for the wholesale lending market, growing the throng of central banks considering a CBDC.
France and Switzerland have both revealed their plans to launch CBDC trials, as the Banque de France and the Swiss National Bank announced that they would trial their respective currencies in a Reuters report that was published on June 10.
The report states that the trial will focus on wholesale lending as opposed to day-to-day public use. Three banks will be a part of the trial — Switzerland’s UBS, Credit Suisse, and France’s Natixis. Well-known names in the crypto sector will also help with the trials, namely the SIX Digital Exchange, R3, and the Innovation Hub.
European Central Bank (ECB) President Christine Lagarde has spoken of a digital euro in the past, though she has said that a final product may be years away. The Bank of France, meanwhile, has used blockchain technology to settle digital bonds issued by the European Investment Bank.
The CBDC announcements come as the world’s top economies prepare for the G7 Summit, which will likely see some discussion about cryptocurrencies. The asset class has had a tumultuous few weeks, and regulators in the U.S. have talked about investor protection. Cybersecurity is also a major talking point that U.S. President Biden may bring up.
Meanwhile, these large economies are aware that blockchain-based payments systems have benefits, but have dallied on a decision. But, global regulatory bodies like the Bank for International Settlements (BIS) are also throwing support behind CBDCs. The BIS has also said there needs to be international cooperation for CBDCs.
CBDC pilots now a common development
France and Switzerland join several other countries in the race to develop a CBDC that is fully functional and does not feature any compromises. France has long been looking at this, with the Societe Generale discussing a CBDC last year. However, it is only with this announcement that there is an official statement from the country’s central bank regarding a larger pilot.
China leads this foray into the CBDC space, though the Bahamas and Cambodia are actually the top two CBDCs available, according to PwC. The latter two countries have already launched their digital currencies, while China is currently undergoing trials and preparing for a launch later this year.
Other countries that are looking into CBDCs are Sweden, Japan, and South Korea. It is likely that we will hear updates on this matter in the near future, as more governments are announcing their intentions.
The fact that so many central banks are talking about CBDCs suggests that the crypto space may be at a major turning point. Some governments have stated that CBDCs can co-exist with the private cryptocurrency market, while others have roundly criticized the latter. Of these, U.S. Senator Elizabeth Warren has been one of the most vocal critics, saying that cryptocurrencies have failed to live up to their promises.