Blockchain for Banking News

Wholesale CBDC digital euro trials to use real money

wholesale cbdc euro working group

Last month the European Central Bank (ECB) held the second meeting for the working group that’s exploring how to settle DLT transactions with central bank money, including a wholesale CBDC. The ECB clarified that the trials will involve experiments and real money with the onboarding to start later this year and the tests to commence in Q2 of 2024.

While it will be possible to settle with real cash, that option will only be available on certain days and for a limited number of hours. And it is only available intraday so cannot be carried overnight.

Nine months have been earmarked for the experiments but a poll of the more than 50 commercial participants indicated a preference for up to six months of trials.

Three DLT payment options

As previously outlined three payment options are planned as part of the tests. The Deutsche Bundesbank will provide a trigger payment option where the private DLT network connects to a Trigger Chain to initiate payments on the real time gross settlement (RTGS) system. Once the payment is confirmed, the trigger chain will communicate back to the DLT, which will transfer the ownership of the securities.

The Bank of Italy also has a model that triggers conventional payments, but its TIPS Hash-Link solution works quite differently to the Bundesbank and involves escrowing the securities and payment. 

The Banque de France will provide the wholesale CBDC token option following its previous dozen trials. While it has outlined a number of potential models, these trials will involve a CBDC ledger (DL3S) as the only place where the CBDC is available. Settlement will be enabled through interoperbility with multiple other DLT ledgers.

The Italian and French solutions will require central bank money for the trials to be escrowed by the participant’s national central bank. The escrow is only for the purposes for the trials not for any future potential solution

Only banks involved, but …

The trials are only open to those with access to the TARGET payment system. However, some organizations are indirect TARGET participants, so they will acess the trials via a payment bank or cash custodian. The CBDC token option also suggests that investors might be able to participate. However, they will have a sub wallet with a bank, and the subwallet will be read only. In other words, investors can participate but the cannot initiate payments – the bank will do that on their behalf.

During the meeting the ECB tried to gauge which use cases are of interest. There was more interest in delivery versus payment (DvP) applications rather than payment versus payment (PvP) and participants were asked to put planned use cases in writing. However, the public call for interest is still a little way off. The next meeting is on September 7.