French Central Bank Trades Debt Securities on Private Blockchain

European plans for a Central Bank Digital Currency (CBDC) are moving from a research and experimental phase to practical applications.

article-image

Bank de France; Source: Shutterstock

share

key takeaways

  • A consortium of banks and financial institutions including BNP Paribas, HSBC and Société Générale participated, along with Agence France Trésor, the Debt Management Office of the French government
  • Goal of the project was to look at how blockchain could reduce the overall cost and increase the efficiency of the capital markets

The French central bank — Banque de France — embarked on a test of a digital euro in March 2020, to learn how a European CBDC could be used in the exchange and settlement of tokenized financial assets using a permissioned blockchain. A consortium of banks and financial institutions including BNP Paribas, HSBC and Société Générale participated, along with Agence France Trésor, the Debt Management Office of the French government.

According to a report published by Euroclear, a Belgium-based financial services company that led the project, the experiment “showed the capacity of blockchain platforms to coexist and interoperate with existing settlement infrastructures.”

“By attracting more direct market participants on a common ledger for post trade operations, blockchain could also reduce the overall cost and increase the efficiency of the capital markets,” the report states.

An embrace of blockchain, Euroclear concludes, provides opportunities for the market to “change the way it organised so as to reduce trade to settlement cycles, increase direct market participation and reduce reconciliation efforts.”

These are advantages — in short, speeding transaction settlement and reducing costs — that have been long championed by advocates of DeFi, but they can also serve public and private institutions that rely on more centralized infrastructure.

A permissioned blockchain

The French project is not operating on a public blockchain, such as Ethereum, nor do they regard a public blockchain as desirable for the intended use case, where “a framework of control, privacy and confidentiality” were requirements. Instead, with IBM as a technology partner, a permissioned blockchain using Hyperledger Fabric was employed to run the experiment via just three network nodes. (For comparison, Ethereum’s mainnet has about 3,740 nodes currently.)

The parties were aiming to simulate real market activity at scale, with Agence France Trésor issuing securities tokens and Banque de France issuing CBDC tokens using the IBM-built blockchain. The securities’ had an International Securities Identification Number (ISIN) generated by smart contracts, which also managed the auto-collateralization on settlement flows.

In a video posted to YouTube by Eurorclear, Guénolé de Cadoudal, of Crédit Agricole, said, “the tested on-chain business logic demonstrated the benefits of an automatic cash and security liquidity pool by leveraging on-chain portfolios as collateral.”

The participants also found that a token-based approach proved to be just as efficient as an account-based one, with the former better able to facilitate cross-border funds flows. 

Euroclear’s Philippe Verriest calls the experiment a success that “demonstrates that a broad range of post-trade operations can be run on blockchain,” adding that, “we believe the blockchain technology could increase the overall efficiency of post-trade operations.”

While blockchain aficionados and industry participants are likely to read this as restating the obvious, it is important to see major public and financial institutions acknowledge the technological merits.

The next step will be to compare these experiments to those running on public infrastructure. Société Générale has recently undertaken to embark on one such effort by posting real estate bonds as collateral with MakerDAO.

For now, the reports’ authors conclude:

“It does not seem possible for a public blockchain model to meet all the regulatory requirements to run post-trade activities.”

Perhaps as the technology matures, French institutions can reassess which is more compatible with the principles of liberté, égalité, fraternité.

This story was updated on October 20, 2021, at 10:13 am ET.

Tags

Decoding crypto and the markets. Daily, with Byron Gilliam.

Upcoming Events

Old Billingsgate

Mon - Wed, October 13 - 15, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

Industry City | Brooklyn, NY

TUES - THURS, JUNE 24 - 26, 2025

Permissionless IV serves as the definitive gathering for crypto’s technical founders, developers, and builders to come together and create the future.If you’re ready to shape the future of crypto, Permissionless IV is where it happens.

Brooklyn, NY

SUN - MON, JUN. 22 - 23, 2025

🚀 Build What’s Next — Permissionless IV Hackathon Join us June 22–23 in Brooklyn for the Permissionless IV Hackathon — a 36-hour sprint hosted by Cracked Labs and Blockworks where top builders turn ideas into real products. Come to launch, not just […]

recent research

Research Report Templates (10).png

Research

Kamino has evolved into a full-stack asset scaling suite with V2: unlocking new markets, improving capital efficiency, and catering to various risk profiles. We believe it is best positioned to become the credit backbone of Solana as the ecosystem matures. Simply put, KMNO remains our highest-conviction bet in the Solana ecosystem. This report lays out our thesis.

article-image

This isn’t the worst hack to ever hit Mt. Gox, but it could be the most entertaining

article-image

Crossover’s CEO discusses institutional interest and how over-the-counter (OTC) trading has picked up in crypto

article-image

Sponsored

This collaboration signifies a major leap forward in expanding the reach and utility of Web3 gaming within the vibrant Asian market

article-image

Asymmetric information is threatening crypto the same way it once threatened equities. Disclosure might be the fix.

article-image

Rate cuts drift into Q4 limbo as markets pretend everything’s fine

article-image

The FOMC held interest rates steady for the fourth-straight time on Wednesday