France to experiment central bank digital currency in 2020

France to experiment with central bank-issued digital currency in 2020. In a conference hosted by ACPR, the Bank of France Governor Francois Villeroy de Galhau said that the central bank will start the test soon for the digital currency.

The results of the experiment will be shared before the end of the Q1 2020. In the initial phase, the central bank will issue the wholesale digital currency. It will be available only for banks to use for settling transactions with each other.

As the concerns grow among governments over the launch of private currencies planned by Facebook and others (stable coins), the French government called for the creation of a euro digital currency.

The digital currency could provide consumers with direct access to the central bank’s money. Along with the guarantee of fast transaction settlement, the digital currency would help to keep the monetary sovereignty of central banks.

Additionally, the digital euro currency would also help central banks to overcome the dominance of US-based payment providers such as Visa, Mastercard, PayPal, etc.

Today more than two-thirds of electronic payments (non-cash) are handled by overseas payment giants. Relying on non-European payment providers is problematic as central banks and authorities have limited authority and oversight over them.

However, to overcome the US-based payment provider’s dominance, the digital currency needs to reach retail users. It is therefore expected that the central bank will make the digital currency available for everyday citizens but would be subject to a special vigilance.

Transforming payment landscape:

Central banks can’t ignore the trends of the cash-less economy and fall behind on technological innovation. The move to launch the digital currency comes in a wake of the increased threat from private companies.

Private companies are swiftly planning to move to the financial sector. With Google’s checking accounts to Facebook’s digital currency, the traditional banking system is facing direct competition with the private companies. 

This is also the same reason why China is planning to launch its digital currency to overcome the dominance of private payment platforms – WeChat and AliPay. Currently, China’s central bank is still researching on the establishment of the infrastructure needed for its digital currency. Therefore, no exact timeline has been set up.

If the experiment goes as planned, France could be the early adopter of digital currency to modernize its financial system.