Banque de France CBDC project uses blockchain to settle transactions

Central bank and French lender use blockchain platform to pay for €40m securities tokens

The Banque de France and Societe Generale said they have successfully settled securities using a prototype wholesale central bank digital currency (CBDC) earlier this month. The BdF said on May 20 it had used its blockchain network to settle the transactions using its “digital euro” prototype. The French commercial bank said its securities arm, Societe Generale SFH, had issued €40 million ($43.9 million) of covered bonds as “securities tokens” registered on a public blockchain network on May 14. The bonds had been rated investment grade by both Moody’s and Fitch.

Societe Generale itself then fully subscribed to the issue by paying “in a digital form of euros issued by Banque de France through a blockchain platform”, it said.

The pilot formed part of the Banque de France’s latest initiative to find partners for wholesale CBDC experiments. In March, the central bank called for applicants to work on proofs of concept that would explore whether CBDCs have the potential to streamline payments.

The Banque de France said it had received a large number of applications to work with it in CBDC experiments, and that it would conduct similar experiments to its Societe Generale partnership in the coming weeks.

“The results of these experiments will be an important element of the Banque de France’s contribution to the more global reflection led by the Eurosystem on the interest of a CBDC,” the central bank said.

The transaction also formed an important part of Societe Generale’s digital currency project. The experiment “demonstrates the feasibility of financial securities being digitally settled and delivered in CBDC for interbank settlements”, Societe Generale said in a statement.

Societe Generale said its CBDC experiment would also “pave the way” for the automation and shortening of payment processes, with “simplified market infrastructures and strengthened security”.

In April, the bank issued €100 million in security tokens, which were settled in normal euros.

In December 2019, governor François Villeroy de Galhau announced that the BdF was reorganising its payments directorate to devote more time to experimenting with CBDCs.

At the time, the governor said one of the Eurosystem’s next priorities should be to explore the possibility of an ‘e-euro’. He said issuing a token CBDC, specifically for settlement and post-trade activities, could improve efficiency and resilience, while cutting intermediation costs.