The Bank of Spain has invited interested parties to participate in wholesale central bank digital currency (CBDC) experiments, with applications closing at the end of January 2023 and the trials due to run from April through to the end of 2023. The central bank’s tests are independent of digital euro initiatives that are part of the Eurosystem.
It is keen to assess the degree to which a tokenized wholesale CBDC can improve the “efficiency, agility and security” of financial market infrastructures. More specifically, it wants to quantify the benefits.
The trials will cover three areas. Firstly it wants to simulate the operation of a wholesale CBDC, enabling interbank payments. Secondly, it wants to explore the use of a wholesale CBDC for securities settlement with delivery versus payment (DvP) transactions.
The third area of exploration is looking at the advantages and disadvantages of a wholesale CBDC to both the central bank and the financial system. The benefits include efficiencies, resiliency and security. On the flip side, there could be additional costs, performance or scalability issues.
The analysis of CBDC benefits can also cover cross border payment experiments (multi-CBDC) with other central banks. And the Bank of Spain is keen to explore the issue of interoperability if a CBDC token is used to settle traditional financial securities on another platform. Or if it settles tokenized digital assets on a platform that uses different blockchain technology to the central bank’s platform.
One of its areas of interest is analyzing distributed ledger technology (DLT) and the pros and cons of a private, hybrid and public network.
Elsewhere IberPay and several Spanish banks are conducting experiments in preparation for a potential retail digital Euro.
The Banque de France conducted numerous wholesale CBDC experiments in 2021 and plans to launch a pilot in 2023. With the launch of the EU DLT Pilot Regime, wholesale CBDC is seen as crucial to settle blockchain-based digital securities.
