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Banque de France: will be surprises with retail digital euro use cases

digital euro cbdc

Today at the Hyperledger Global Forum, the Banque de France‘s Nicolas de Labarre said that while priorities have been defined for the digital euro, the potential use cases for the central bank digital currency (CBDC) are still quite open. 

A consumer-facing digital euro

“We didn’t decide yet which will be the first use cases. There will be surprises,” he said. He was responding to Mai Santamaria, a policy adviser at Ireland’s Department of Finance. 

Her view is that currently, there is too much focus on digitalizing the current processes and insufficient consideration of blue sky approaches. For example, she suggested it’s possible to use programmability to deduct tax at source and reduce the hassle of tax paperwork. Another suggestion was reducing remittance costs, which is very much on the radar of many central banks.

Santamaria also believes that central bank money doesn’t have to be used for daily payments. She compared payment rails to modes of transport where sometimes you might want to use a scooter, bus, train or taxi. It depends on the transaction, cost and medium. Because a CBDC is used for government payments, it does not have to be used for everything.

The French central bank’s De Labarre said that people may not always appreciate the risk of some of the digital payment rails, and a key objective of CBDC is to provide stability.

“We are keen to provide central bank money in the form of tokens that anyone can use in their wallet,” he said. Whether or not a CBDC is account or token-based is one of the key decisions.  

He acknowledged that currently, a large proportion of payments are commercial money. “How can we have a system that is co-managed by us and by commercial banks? This is the key discussion that we are having today,” he said.

Interbank digital euro

De Labarre also touched on the Banque de France’s considerable work on a wholesale CBDC. He spoke about the two groups of work, for settlement of security tokens and for cross border payments.

Different types of infrastructures have been debated for cross border payment or multi-CBDC. The Banque de France has worked with both Switzerland and Singapore on the topic, and Singapore is leading one of the bigger multi-CBDC initiatives, Project Dunbar.

The central banker highlighted that central banks are unclear whether there will be a single cross border infrastructure or multiple ones. He made no mention of the politics around another single infrastructure, SWIFT. “I don’t know whether (there will be ) just one unique cross border payment versus payment use case or whether we will have a network of regional networks,” he said.

Meanwhile, today it was announced that the Banque de France has joined Hyperledger along with the Central Bank of Nigeria. Existing central bank members include the Bank of England and the Boston Federal Reserve.

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