France could get Digital Euro in 2023, kicks off second stage of CBDC experiments


  • France’s central bank wants a working central bank digital currency to go live as early as 2023.
  • Banque de France kicked off the second phase of its CBDC experiments to streamline domestic and cross-border transactions. 
  • The European Central Bank recently issued three reports to pass the biggest cryptocurrency law in Europe. 

Banque de France wants a working wholesale central bank digital currency (CBDC) to go live as early as 2023. The central bank digital currency is expected to be a digital version of France's sovereign currency, the Euro. The European Central Bank has urged regulators to pass the biggest cryptocurrency law in Europe. 

Also read: UK financial watchdog says "non-negotiable" crypto regulation a must after Terra LUNA crash

Digital Euro could be a reality by 2023

François Villeroy de Galhau, Governor of Banque de France, announced on July 12 that the central bank has started the second phase of experimentation with a wholesale CBDC. The Digital Euro would be used to streamline domestic and cross-border transactions between banks. France's CBDC would be a digital version of the country's sovereign currency, the Euro. 

Galhau announced in his speech at the 2022 Paris Europlace International Financial Forum

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.

The French Central Bank first started its experiments on a whole CBDC in March 2020 and wrapped up stage one by December 2021. Banque de France ran nine experiments in the first stage with the private sector and public actors. 

Project Jura of the Bank of International Settlements explores euro and Swiss Franc transfers

The Bank of International Settlement's (BIS) Project Jura explores the direct transfer of Euro and Swiss Franc wholesale central bank digital currencies (wCBDC). The transfer was made between French and Swiss commercial banks on a single DLT platform operated by a third party. 

Tokenized assets and foreign exchange trades are settled using Payment versus Payment (PvP) and Delivery versus Payment (DvP). The experiment is conducted in a near-real setting.

Institutional CBDC v. Retail CBDC

It is important to note that France's Central Bank has floated the term "wholesale" in the announcement. This implies that the CBDC is geared toward institutional actors rather than retail. The Digital Euro would therefore be used by financial institutions that exchange fiat, the Euro and not retail actors. 

The development and the implementation of the CBDC will, therefore, not involve the public or open the Digital Euro to the open market to exchange it for goods and services. The Governor has announced that retail CBDCs will be launched with the assistance of private banks in the future. 

The Governor further said,  

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.

Retail CBDCs are the subject of debate

Retail CBDCs have emerged as a subject of heavy debate among policymakers due to the additional risks posed to financial stability. There is a fear of a bank run, where citizens withdraw their deposits on a large scale and convert it into CBDCs. However, banks will be entrusted with the responsibility of retail CBDCs, and Galhau believes some functions will remain under the "sole responsibility" of intermediaries. 

Galhau commented on retail CBDCs and responsibility. The Governor said, 

In particular, I believe that the eurosystem should not have the role of managing digital Euro holdings: The Banque de France closed its last private customer accounts over 20 years ago and does not intend to reopen any.

The European Central Bank is working on a separate retail CBDC. On July 11, finance ministers in the European Union discussed the Digital Euro at length. They agreed it should complement cash usage in the bloc and not replace it entirely. The ECB recently issued three reports to pass a big crypto law in Europe. For more details, read this

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