The Central Bank of France is set to test a Central Bank digital currency for financial institutions in early 2020. The French government sees the drive as a mechanism to enhance the effectiveness of its financial system.
It also seems like a response to the launch of Facebook’s planned Libra project. Gradually, digitalisation of national currencies is becoming a norm.
François Villeroy de Galhau, the governor of Bank of France, declared on Wednesday that the bank would pilot a digital currency which will be the first in Europe. “We intend to start experimenting quickly and launch a call for projects (for private sector players) by the end of the first quarter of 2020” Galhau stated.
According to the announcement, financial institutions will use the proposed digital currency. It will be known as MDBC.
The move intends to extend the capability and fecundity of the financial system, and at the same time, promote trust in the currency. It “would provide a powerful lever for asserting our sovereignty against private initiatives of the Libra type,” the governor remarked.
Galhau further stated that Facebook’s announcement in June to launch Libra necessitated the initiative. Libra has ruffled a lot of features since it was made public to the extent that there was a US Congressional hearing about it.
Bruno Le Maire, France’s Minister of Economy and Finance who in September objected to Libra called for the creation of the MDBC. He additionally emphasised the significance of not being beaten by China, who is developing a national cryptocurrency.
“I see a certain interest to move quickly on the issue of at least a wholesale MDBC to be the first issuer at the international level and thus derive the benefits reserved for a reference MDBC. Thresholds on the amounts of anonymous transactions, as is already done in France for payments in electronic money or cash, could be introduced for this purpose”.
Innovation At Play
It is estimated that the Bank of France, which has over 10,000 employees, intends to work with the private sector experts to implement the project. It is reported that the Central Bank is transforming its internal operations and recruiting requisite additional skills.
The Payment Supervision and Market Infrastructure Directorate is now known as the Infrastructure, Innovation and Payments Directorate (DIIP). It is tasked with the innovations of payments, infrastructure and digital currency.
Photo Credit: MIT Technology Review