EU central banks set to unveil wholesale CBDC plans within weeks, says France's central bank chief

Central banks across the European Union are set to reveal plans for a wholesale Central Bank Digital Currency (CBDC) in the coming weeks, according to François Villeroy de Galhau, the Governor of France's central bank. The announcement was made at an event in Paris on Tuesday, where Villeroy de Galhau emphasised the speed of progress in the development of a CBDC tailored for financial markets.

Wholesale CBDC advancements outpace retail controversy

The wholesale CBDC, designed for use within financial markets, is progressing swiftly, overshadowing a more contentious proposal for a digital euro intended for everyday citizens. Concerns regarding privacy and the potential impact on commercial banks have raised debates among lawmakers, resulting in a cautious approach towards the retail digital currency initiative.

Villeroy de Galhau mentioned that the Eurosystem has initiated explorations into innovative technologies for central bank money settlement, including the issuance of tokenised CBDC. Eligibility criteria and the call for interest will be published in the coming weeks, with practical trials, involving real transactions, slated for the next year.

Permissioned networks & potential savings

The central banks are considering permissioned networks operating with smart contracts, allowing them to govern money supply effectively. Exploring alternative protocols and blockchains, along with their proprietary Distributed Ledger for Securities Settlement System (DL3S), is part of their strategy. Notably, recent research by financial experts suggested that utilising distributed ledger technology in financial markets could potentially save a staggering $100 billion annually by streamlining collateral and automating back-office processes.

While the wholesale CBDC plans have been well-received in industry circles, the fate of the retail CBDC remains uncertain. A group of cross-party EU lawmakers has urged the European Central Bank to delay any decisions related to the retail CBDC until new legal constraints are agreed upon. The signatories of the letter include influential figures like Michiel Hoogeveen from the Netherlands, former Belgian Finance Minister Johan van Overtveldt, and Markus Ferber, the economic spokesperson for the European People's Party.