Denis Beau, the First Deputy Governor of Banque de France, i.e., the French Central Bank is open to blockchain in central banks. Beau expressed this opinion recently while speaking at the AFME Annual Capital Markets Technology and Innovation Conference.
Blockchain in central banks seems to be an idea whose time has arrived. Central banks have started to view blockchain separately from cryptocurrencies like Bitcoin, and they are seeing the value that blockchain could offer.
Central banks in several countries are already exploring blockchain to improve aspects like payments system efficiency, financial inclusion, and payments security. There are additional areas too, where central banks are looking at blockchain, e.g.:
- Retail central bank digital currency;
- Wholesale central bank digital currency;
- Interbank securities settlement;
- Bond issuance and lifecycle management;
- Trade finance;
- Information exchange and data sharing;
- Cash money supply chain;
- KYC/AML.
Many central banks aren’t receptive to decentralized cryptocurrencies like Bitcoin since such digital currencies undermine their control over the monetary policies. However, some have warmed up to central bank digital currencies (CBDCs) that they could exercise control over.
A recent report states that over 40 central banks are actively experimenting with blockchain. Interestingly, the report identifies Banque de France as a prominent one among them.
Warming up to blockchain!
Denis Beau believes that Banque de France should make efforts to improve settlements and payment systems in Europe, and blockchain could help. Beau states that tokenisation of financial assets and increasing use of blockchain could help financial markets.
According to Beau, the use of the “Distributed Ledger Technology” (DLT) to store and transfer tokenised assets will benefit markets. He also indicated that Banque de France will be willing to work with the European Central Bank (ECB) and other central banks in Europe for this.
Beau expressed interests about CBDCs. He also spoke about new settlement assets based on blockchain, and how they could compete with traditional settlement assets.
The opinion of Beau appears to be in alignment with the approach of the French government. As governments and central banks in Europe deliberate on blockchain and cryptocurrencies, France is encouraging EU countries to adopt a pragmatic approach. The country is working with the EU countries so that they adopt regulations concerning blockchain and cryptocurrencies similar to what France has adopted.
At the same time, France opposes projects like Facebook’s Libra. The country believes that such projects could harm the monetary sovereignty of countries, given then Facebook could privatize money with the control in its hands. As Beau stresses on CBDCs, he effectively champions the control of central banks over the supply of money.
Will we see blockchain in central banks soon?
Given the active interest of several central banks on the blockchain technology, the time may not be far when a few central banks actively use it. The assertions by such a senior official of Banque de France points to this direction.
