France launches second phase of the CBDC project

France: The President of France’s Central Bank, François Villeroy de Galhau, announced Tuesday that the bank has launched the second phase of testing a wholesale CBDC.

CBDC coming soon to France

The President of the French Central Bank announced on Tuesday that they have launched the second phase of a new state-owned digital currency project.

JUST IN: ?? France has launched the second testing phase of its central bank digital currency (CBDC).

— Watcher.Guru (@WatcherGuru) July 12, 2022

Galhau, during a speech at the Europlace International Financial Forum in Paris, said:

“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 is the second phase of experimentation on a state-owned digital currency, after having launched the first one last October, which ended in December and carrying out the first test last June. Villeroy de Galhau explained that the first phase included nine experiments conducted hand-in-hand with the private sector and other public actors.

The central bank president, said:

“The role of central bank money – are increasingly threatened by the digital revolution of the financial sector. First, it results in the decline in the use of cash in transactions, which calls into question the availability of central bank money for the public. Increased reliance on digital payment solutions also shows how our European ecosystem has become critically dependant on non-European players”.

The main motivation for a digital euro, according to de Galhau, would be to preserve the role of public money in a digital economy, preserve the accessibility and usability of central bank money, and sustain our monetary sovereignty and limit the risk of “external” digital assets.

France invests heavily in blockchain innovation

France is the most advanced European country in designing its digital state currency, and it seems to be following the recommendations of the Encore, which has long called on states to have a digital state currency. In September last year it launched a test with four central banks, Hong Kong, China, the United Arab Emirates and Thailand, for a new prototype digital currency.

The French Central Bank has also created a new proprietary DLT technology, called DL3S. 

The bank’s president explained:

“This blockchain has been entirely designed by the Banque de France in order to meet the needs and expectations of market participants as a permissioned blockchain with efficient delivery and settlement services, using CBDC”.

A first prototype of a digital state currency is expected to be ready in the second half of 2023, which should also involve the ECB to finally arrive at a new digital euro in a very short time frame. This new digital currency is supposed to be issued by also leveraging cooperation with private institutions.

According to the European finance ministers who met last week and who also reportedly talked about the subject, the new digital euro should be complementary to fiat currency and complement cash and not replace them.