Central bank digital currencies (CBDCs) are taking shape globally, and Europe is at the front line to ensure that a digital euro will succeed if it is ever rolled out to the public.
On December 8, the Banque de France (BdF), the Swiss National Bank (SNB), and the BIS Innovation Hub (BISIH) announced that they had successfully completed the pilot phase of a wholesale central bank digital currency (wCBDC).
Successful Pilot Phase of Project Jura
The three institutions were conducting a pilot phase for the CBDC, in what was dubbed Project Jura. Project Jura’s objectives were to assess how a euro and Swiss franc wCBDC could be used to settle cross-border payments.
The pilot phase was conducted through a third-party distributed ledger technology platform. The technology used to support this project consisted of a decentralized P2P network of computer nodes (Corda). These nodes were used to validate transactions made with the wCBDC.
The computer nodes also ensured that the legal, regulatory, and corporate rules were met during transactions.
The euro and Swiss franc fiat currencies were tokenized, and so was the Negotiable European Commercial Paper. This paper is a debt instrument with a maturity of less than one year and is dominated by euros.
The other factor assessed during the pilot program was the infrastructure networks that supported transaction settlement in real-time. Digital assets registry and bond digitization were the other factors that were also assessed.
No Guarantees for CBDS Launch
While the three institutions stated the pilot phase was a success, there is still no guarantee that France, Switzerland, or the European Union will issue a wCBDC.
According to the report
“wCBDCs could be incorporated into novel settlement arrangements that could change the structure and functioning of capital markets, money markets, and foreign exchange markets.”
“Broadening the use of central bank money through wider access or increased cross-border settlement could catalyze these changes, as could deeper integration of currencies with other digital assets and securities,”
the report added.
Bank of England is Also Working on a CBDC
The Bank of England hasn’t been left behind in CBDC development, either. In November, the HM Treasury (HMT) and the Bank of England announced that they had already formulated the next steps that will lead to the creation of a UK CBDC.
In its report, the two institutions stated that if a CBDC is developed, it would be issued through the BoE, and it would be available for use by businesses and households for daily transactions. Moreover, the CBDC would also be used alongside cash and bank deposits, and it would not seek to replace them.
In 2022, the BoE and the HMT announced they would launch a consultation phase to assess the viability of a UK CBDC. The consultation phase would involve checking the merits of this technology, evaluating the best design as well as the benefits of such technology to users and businesses.
However, the UK is yet to decide on whether a CBDC will be introduced in the UK. In April this year, the BoE and HMT had created a joint task force to be used in exploring a potential CBDC for the country. The bank is also working with different stakeholders to offer strategic and technical roadmaps for the CBDC development. Ripple is among the firms selected to assess the development of a digital pound.