Banque de France has successfully used Central Bank Digital Currency (CBDC) in a test environment, in connection with TARGET2-Securities (T2S), the European Central Bank settlement platform.
The new test demonstrated that distributed ledger technology (DLT) could be used to issue CBDC in connection with existing infrastructures such as T2S, where listed securities are delivered.
SEBA Bank purchased securities from the Central Bank of Luxembourg, while the post-trade settlement was handled by LuxCSD.
The transaction was carried out through the Conditional Securities Delivery functionality (CoSD) already existing in T2S, which makes the booking of securities dependent on the success of an event external to T2S.
Meanwhile, Banque de France simulated CBDC tokens on a public blockchain, while preserving the confidentiality of the transactions.
According to the bank, as soon as tokens were successfully transferred from SEBA Bank to the Central Bank of Luxembourg, LuxCSD delivered the securities in T2S.
CBDC describes a concept of digital currency issued by a central bank, and currently, central banks around the world are examining the potential of CBDC for the respective jurisdictions.
For example, in April the Bank of England and HM Treasury revealed they are set to create a CBDC Taskforce to coordinate the exploration of a potential UK CBDC.
Serge Munten, head of operations at the Central Bank of Luxembourg, comments: “The world of payments is evolving fast with digitalisation. At the Central Bank of Luxembourg, we strive to bring our clients the latest innovation in terms of payments services.”
“It was only natural for us to participate in this experiment, which might determine the future of the Central Bank Digital Currency in the eurosystem.”
Marco Caligaris, CEO at LuxCSD, says: “Connecting new technology, such as DLT, with existing infrastructure is crucial to offer optimal services for the market. By joining forces, the industry can develop sustainable solutions that not only work today but lay a strong foundation for the future.”
“Being a trusted central securities depository at the heart of one of Europe’s financial centres, LuxCSD is perfectly positioned to support the industry on its way towards a true digital finance ecosystem,” Caligaris adds.
Earlier this year, the Banque de France successfully completed a CBDC transaction, using the SETL blockchain that powers the IZNES fund platform.
