France tests crypto assets in round of government bond trades
France has used digital assets and blockchain technology in a series of bond transactions, marking one of the largest cryptocurrency trials to date in a leading established market.
A consortium of the largest players in the French financial market used a digital currency issued by the Banque de France as part of the 10-month experiment in the country’s debt market.
The trial was conducted by securities depository Euroclear and included several of France’s largest banks, as well as the French Office for Public Debt and the Central Bank, and used a system developed by US-based IBM. United.
The pilot was part of a program commissioned by the Banque de France in March last year to explore how digital currencies issued by the central bank would be traded and settled if they were turned into tokens, with transactions recorded on a digital ledger. Typically, transactions are reconciled between parties, recorded, and assets transferred to a single authority such as a central bank or securities depository.
It comes as global regulators urge central banks to act on the growth of crypto assets this year. Policymakers fear that private sector initiatives regarding payments and cryptocurrency issuance could lead to central banks losing control over monetary policy.
The consortium included BNP Paribas, Crédit Agricole CIB, HSBC and Société Générale. The groups traded government bonds as ‘tokens’ of securities and settled them with cryptocurrencies provided by the central bank.
The project tested the usefulness of a central bank currency on a range of day-to-day activities, such as issuing new bonds, their use in buyback agreements, as well as coupon payments and buyback transactions. .
The experiment executed nearly 500 instructions in the primary and secondary markets. Euroclear refused to disclose the value of the transactions.
“Together, we have succeeded in measuring the benefits inherent in this technology, concluding that central bank digital currencies can settle central bank money securely,” said Isabelle Delorme, deputy managing director of Euroclear France.
Veteran politician Benoît Coeuré warned central banks last month to act faster to develop official digital assets, as new technologies such as decentralized finance pose a threat to deposit-taking institutions and intermediaries such as banks and custodians. But the efforts of central banks to create digital currencies are uneven.
While China, Sweden and the Bahamas are at an advanced stage, key policy makers in Europe and the United States have only committed to exploring the possibility of launching theirs.
“We are rapidly moving towards a fundamental change in the post-trade market infrastructure,” said Soren Mortensen, global director of financial markets at IBM.
“This project went well beyond previous blockchain initiatives as it successfully tested most central securities depository and central bank processes while eliminating current intermediate steps, such as bringing together market intermediaries. “, he added.