The idea of CBDCs has gained massive attention from Central Banks across the world. Earlier today, the Bank of Russia announced its preference for a digital Ruble than a private stablecoin. Now, according to reports, Banque de France, is looking toward a fully operational wholesale digital asset by the beginning of 2023.
According to François Villeroy de Galhau, France Central Bank governor, the establishment has already given a green signal on the second phase of experimentation with a wholesale CBDC.
The main objective of the CBDCs would remain to facilitate domestic and cross-border transactions between banks. The first phase of experimentation was carried out in December 2021, and it consisted of the issuance of a digital bond on a blockchain with settlement in CBDC.
A wholesale CBDC; How does it work?
At the 2022 Paris Europlace International Financial Forum, Galhau mentioned,
“We want to get closer to a viable prototype, testing it in practice with more private actors and more foreign central banks in the second half of 2022 and in 2023. This work ensures that we stand ready to bring central bank money as a settlement asset as early as 2023.”
However, it is important to note that the term wholesale was floated around in the announcement. A wholesale CBDC is different from a regular retail CBDC as it would only be utilized by financial institutions to exchange fiat currencies.
It does not involve public use as a medium of exchange for goods and services. Hence, right now, it is only moving towards an institutional CBDC. However, The Central Bank has mentioned that they are also exploring a retail CBDC in the future. Additionally, the governor added that retail CBDCs will be launched with the assistance of private banks. He added,
“The Eurosystem should entrust banks with the distribution of digital euros to final users while setting technical, functional and commercial rules – for example, the branding, logo and fee structure.”
With decentralized digital assets losing popularity amongst policy markers, Central Banks are doubling their efforts in building their own digital currency. In fact, the Deputy Governor of the Reserve Bank of India went as far as to state that CBDC would mark the end of other crypto assets. While it is too early to confirm such an assumption, only time will tell if CBDCs can impact the potential of the existing digital currencies.