Bank of France uses digital currency to settle fund.

Digital currencies are the next big wave in the world of finance, with central banks, corporations and companies all over the world conducting research and projects into implementing this technology within their spheres of influence. This has largely been down to the impact that cryptocurrencies have had, especially with the rise in price of Bitcoin serving to draw a lot more attention to this space, and forcing central banks to consider launching their own digital currencies so as to not get left behind. The importance of blockchain can also not be underestimated, since its applications go beyond just payments and finance. We are seeing companies in sectors as diverse as gaming, entertainment, data storage, shipping and healthcare, to name a few, investigating the uses that they can have for blockchain networks, and it can be argued that the impact of this technology will eventually be much greater than that of cryptocurrencies on the world. In fact, just looking at the online gaming and gambling sector can give us an idea of how blockchain is already having a big impact on this sector. Online casinos have already been seeing a lot of traffic over the last year due to the pandemic which forced casinos to shut down, and led users to go online. This has also led to a rise in online casinos which offer users the option to use cryptocurrencies on their platform, meaning that players can place bets using cryptocurrencies. Such examples of an Litecoin(LTC) online casino, for instance, have led to many more people joining these sites and making transactions, while blockchain has also been used to secure transactions and store user data. This shows how an entire industry can be revolutionised by the use of cryptocurrencies and blockchain, and we will perhaps see a similar transformation in the financial sector as well.

In this light, it is interesting to see that the Bank of France, among various other central banks, has been conducting trials with regard to a central bank digital currency, or CBDC. It had a successful pilot project back in December, when it used a CBDC to settle $2.4 million worth of a monetary fund. Basically, $2.4 million worth of simulated shares, on a private blockchain platform, were bought and sold by investors while using this proposed CBDC. It took place on a distributed ledger provided by SETL, which is a UK-based blockchain services provider, and it also provided the CBDC stablecoin which was used in this trial. The IZNEZ platform, which is SETL’s record-keeping application, was used to track fund unit purchases and sales.

Unlike cryptocurrencies such as Bitcoin, CBDCs are stablecoins issued by a central bank, and overseen by them, which is at odds with one of the founding principles of cryptocurrencies i.e. decentralization. However, there is a lot of pressure on national central banks and financial institutions to try and keep up with the growth of the crypto market globally, and this was reflected by a recent statement by outgoing Federal Reserve chairman Jerome Powell, who said that the creation of CBDCs is a ‘high priority’.

We are seeing this move towards CBDCs in various stages across the globe. In China, for example, the Agricultural Bank of China opened the first ATMs on the streets in the Shenzhen region for the transfer of digital yuan, which many experts believe will be the first CBDC to come to fruition globally.In terms of the Bank of France, this was just one of multiple trials and projects currently underway, with many of them expected to run till mid-2021, under the direction of the European Central Bank, which is also prioritising the creation of a CBDC across Europe.

Herbert Wise

“Award-winning food geek. Unapologetic gamer. Wannabe web junkie. Amateur coffee maven. Zombie fanatic. Writer.”