Bank of France: Ethereum And Ripple Could Give Power to CBDCs

The central bank of France is starting an experimental program to research the feasibility of launching its own central bank digital currency (CBDC) for interbank payments and is considering Ethereum (ETH) and Ripple (XRP) as part of the plan.

On March 30, the Bank of France published a document, inviting interested parties to take part in the program with applications accepted till May 15.

The plan lies in identifying a range of economic benefits and potential use cases for a central bank-backed national currency:

“The challenge of these experiments is not to replace these two existing forms of central money, but to identify how innovative technologies could improve the efficiency and fluidity of payment systems and financial infrastructures, allowing a better financial sector to ensure the smooth financing of the economy.”

The central bank is also considering the ways of empowering CBDCs with cryptocurrencies. In a recent internal report, the Bank of France outlines Ethereum and Ripple as two crypto assets which could be leveraged to issue tokenized CBDCs.

“This solution could be employed to carry out end-to-end transactions, including final settlement, using assets that are tokenised on a blockchain… Since the attributes of a unit of the wholesale CBDC (file representing the currency unit, keys enabling use) may be integrated in a cryptoasset circulating on another blockchain, which is possible on Ethereum and Ripple, for example, it would then become possible to use the unit on this blockchain. The wholesale CBDC unit could be exchanged via the secondary blockchain between entities not belonging to the digital currency’s formal circulation network.”

François Villeroy de Galhau, governor of the Bank of France, announced the experimental project in December 2019 alongside the plans to make France the first country to roll out its CBDC.

The regulator states a CBDC could be a the solution for a liquid and safe payment instrument which can keep up with fast-moving technological progress. Other nations, some of them being China and Sweden, also prepare their digital currencies for launch.