Banque de France Leads Successful CBDC Multi-Ledger Test

The Banque de France says it has successfully completed the last experiment of its programme for interbank settlements in Central Bank Digital Currency (CBDC), launched in March 2020. The final experiment was jointly conducted with a group of private actors led by HSBC and IBM.

The experiment an advanced token and digital wallet settlement capability encompassing direct transactions between two CBDCs. A digital bond was issued on a Blockchain and was subscribed to, with a settlement in CBDC, thus successfully testing an end-to-end transactional lifecycle covering CBDCs (minting and allocation), e-bonds (delivery versus payment across primary issuance and secondary trading and coupon payments), and foreign exchange (pricing and payment versus payment settlement). It was conducted in a hybrid cloud environment incorporating public and private clouds and on-premise data sources. Distributed ledgers based on IBM’s Hyperledger Fabric and R3’s Corda were integrated using IBM Research’s Weaver interoperability tool.

“Our collaboration with IBM on this initiative has resulted in this milestone of streamlining front-to-back securities and foreign exchange DVP and PVP settlement processes,” says Mark Williamson, managing director GFX e-risk, partnerships & propositions at HSBC. “Interoperability across different DLT’ss and technologies was key is demonstrating how to save time, reduce market risk and improve security for transactions between central banks, commercial banks and in time our clients around the world.”

Likhit Wagle, general manager global banking & financial markets at IBM, adds, “Our collaboration with HSBC and Banque de France to create a foreign exchange settlement capability that has the potential to reduce costs and improves security, is an important accomplishment that stands to benefit the global financial services industry broadly. As central banks around the world begin to explore the potential for CBDC to bring greater transparency and security to financial transactions, this initiative provides a comprehensive roadmap.”

Banque de France for its part highlights how the communication across the different environments relies on several interoperability components developed specifically, and which represent the benefit of this experiment. These allowed the transfer of the data pertaining to the digital bond across chains, to trigger automatically and atomically the settlement and the accounting of the securities, cash and foreign exchange flows in the various environments, whilst guaranteeing that the Banque de France could control the usage of the central bank money.

“Interoperability across platforms is a key element to maximise the benefits of the distributed ledger technology applied to financial markets,” says Nathalie Aufauvre, director general of financial stability and operations at the Banque de France. “By achieving the transfer of data and assets, as well as the exchange of assets across different blockchains in an atomic way, the Banque de France and HSBC have demonstrated the possibility of such interoperability, essential to ensure that the multiple environments, on which the efficient functioning of markets rely, can co-exist.”