The governor of the central bank of France is sounding the alarm on the risk for European monetary sovereignty posed by digital payment infrastructures, in particular that being set up in China
The Governor of the Banque de France, FranÃ§ois Villeroy de Galhau, believes that the development of the Chinese central bank’s digital currency constitutes a threat to monetary sovereignty and that other countries must step up their efforts. The Banque de France is working on its own CBDC project, completing its latest experiment last week.
Villeroy de Galhau said time is running out for central banks to set up a central bank digital payment infrastructure. “On digital currency and payments, we in Europe must be ready to act as quickly as necessary or risk an erosion of our monetary sovereignty,” he said at a press conference on Tuesday.
Richard Turrin, author of Cashless: the digital currency revolution in China, said, âChina’s CBDC project is advanced, but the key factor is the extent to which it has inspired its neighbors to launch their own projects. The risk for the dollar and the euro is not that the digital yuan will supplant them, but that a new trading region will develop using a CBDC network. “
The European Central Bank must decide on the future of its approach to a digital euro. The Banque de France is at the forefront of experiments in Europe. “The EU will do very well with its CBDC,” Turrin said. âHe’s pursuing him very seriously.
Agence France TrÃ©sor simulated the sale of a government bond (OAT) on an authorized blockchain to several participants, including BNP Paribas, BNP Paribas Securities Services, CrÃ©dit Agricole, HSBC and SociÃ©tÃ© GÃ©nÃ©rale.
Several transactions on the secondary market and repo transactions between private players were carried out between June 21 and 24. The CBDC was issued against both tokenized bonds on the blockchain and securities on the T2S test platform, demonstrating how the intra-day funding process could work with CBDCs.
The cash components of the transactions were carried out with CBDC tokens provided by the Banque de France. These tokens were issued by the Banque de France and controlled via smart contracts which ensure their transfer at the same time as the delivery of the OAT tokens to investors’ portfolios.
âA key objective of this experiment was to demonstrate that a CBDC / blockchain system could coexist with existing platforms,â said Adeline Bachellerie, head of digital currency and innovation at the Banque de France. âIn Europe, a lot of work has been done over the past 10 years to reduce liquidity fragmentation. The positive potential of tokenized assets is interesting, but it would not be satisfactory from a financial stability point of view for CBDCs to break up liquidity pools. The CBDC could play a central role in connecting existing platforms with tokenized asset exchanges on the blockchain, as it is the most secure and liquid asset. “
The Banque de France worked with the European Investment Bank to facilitate the sale of a â¬ 100 million two-year zero coupon bond via Goldman Sachs, Santander and Societe Generale in April. He is also working on a project with the Swiss National Bank, the BIS Innovation Hub and Accenture to develop the systems needed to make cross-border payments of euros versus payments of Swiss francs.