Central bank director French announces second phase of ‘digital euro’ project

Central Bank Director French talks about recent advances in the design of the digital euro, the state of current tests and new projects coming soon

• On Tuesday, the governor of the Banque de France, François Villeroy de Galhau, said that the first phase of experimentation of the digital euro has been completed and that the second will begin this year. Four or five new experiments are also expected to be launched.

Speaking at the International Finance Forum, at Europlace in Paris, the central banker French summarized the results achieved by the European Union in the regulation of crypto-assets under the presidency French, citing in particular the Transfer Fund Regulation (Travel Rule) and the Markets in Crypto-Assets (MiCA).

Europe is considering the purpose and design of a central bank digital euro (CBDC). The main motivation for a digital euro is to maintain the role of central bank money in the economy, even if "threatened by the digital revolution," Villeroy de Galhau continued. He spoke in favour of maximum intermediation during the design process, noting that intermediaries have more experience than central banks in relation to customer relations and Know Your Customer/Anti-Money Laundering (KYC/AML) measures:

"I believe that Europe should not manage digital euro reserves: the Banque de France closed the last accounts of private clients more than 20 years ago, and does not intend to reopen any of them."

Villeroy de Galhau said that a wholesale CBDC, to be used for interbank transfers, will be no less important than that for daily payments. He also cited critical use cases such as the regulation of securities issued via digital ledgers (DLT), and cross-border and currency payments.

Related: Europe seeks to 'harmonise' cryptocurrency rules in Member States

La Banque de France has designed a proprietary digital ledger technology , called DL3S, for a potential future system. It has also built an automated market maker platform based on a decentralized finance model, where multiple CBDC regulations could be executed.

The new experiments will cover a prototype digital euro with private entities and other central banks in preparation for the implementation of the pilot project in 2023. Villeroy de Galhau stressed the importance of interoperability between DLT and traditional systems. DLT will complement and not replace traditional infrastructure, he said.

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