France and Luxembourg central banks work together on a CBDC initiative

The two  central banks assisted the European Investment Bank (EIB) in the Venus Initiative, which allowed them to use an experiential CBDC for a EUR 100 million bond. Aside from France and Luxembourg central banks, the Venus Initiative involved Goldman Sachs, Santander, Societe Generale, and European Investment Bank (EIB). The EIB appointed Goldman Sachs Bank Europe SE, Santander, and Societe Generale to be in charge of issuing and distributing the digital native bonds.

As far as the technical details go, the EIB digital native bond was issued and registered on a permissioned Distributed Ledger Technology (DLT). The subscriptions were cash settled using experimental CBDC tokens issued on a permissioned DLT operated together by the Banque de France and the Banque centrale du Luxembourg. The experiment required a trusted message exchange mechanism between DLTs that included a Hashed Time Lock Contract (HTLC) protocol. This made sure the experimental CBDC tokens transfer and digital native bond delivery could take place in the same day of issuance. 

Banque de France representatives cited by banque-france.fr emphasised how the Venus Initiative had brought both the France and Luxembourg central banks together and how it showcased a way to issue, distribute, and settle digital assets within the Eurozone, in a single day.

Where do we stand on the digital euro?

According to the European Central Bank, the digital euro would represent an electronic equivalent to cash, and it would give people an additional way to pay for goods and services. The ECB is considering launching a central bank digital currency in Europe in response to an increasing demand for safe and trusted electronic payments. Having digital money issued by the central bank would improve the stability of the payment and monetary systems.

This investigation phase started in October 2021 and is expected to conclude in October 2023. The Governing Council will then decide whether to move to the next phase, in which we would see the development of integrated services as well as a testing phase of the digital euro. This phase could take around three years, the ECB reports. 

In order to make sure that a digital euro would not have any negative consequences on the financial sector, the ECB wants to ensure that it would only be used as a means of payment and not become an instrument for financial investments. Moreover, supervised intermediaries should be involved in the handling of a digital euro.