France and Switzerland have announced the successful completion of a test of their wholesale Central Bank Digital Currency (wCBDC).
Project Jura: France and Switzerland test digital currencies
The project was named Project Jura, after the mountains on the border between France and Switzerland, and was carried out by the Banque de France (BdF) and the Swiss National Bank (SNB), together with the BIS Innovation Hub (BISIH).
In fact, the final report was published on the official website of the BIS (Bank for International Settlements).
The project aimed to test cross-border settlements with wCBDC in euros and Swiss francs, and was carried out on a third-party distributed ledger platform (DLT).
In addition to the three proposing banks, Accenture, Credit Suisse, Natixis, R3, SDX and UBS participated in the project, with support from Heuking, Linklaters and OCTO Technology.
The utility of wCBDC
According to the final report, Project Jura is expected to make a significant contribution in laying the groundwork for the possible adoption of wCBDCs, an alternative medium of exchange for central banks that may offer new functionalities and utilities.
The new technology tested promotes the secure and efficient settlement of domestic and international financial transactions, with particular utility for cross-border dual-currency transactions.
The report states:
“The foreign exchange market in particular could be a key beneficiary by migrating towards outright exchanges in wCBDC where trade execution, payment and settlement may become a single transaction, while mitigating risks and increasing efficiency. This could help to reduce the fragmentation of liquidity in correspondent banking globally and to promote the international use of central bank money”.
The experimental technology used by the Jura Project is based on Corda‘s peer-to-peer network, and validates transactions ensuring compliance with all legal, regulatory and commercial rules of the nations involved.
This was done by tokenizing fiat currencies, and using a short-term (one year or less) euro-denominated debt instrument called Negotiable European Commercial Paper.
wCBDC will not come to market
However, despite the success of the pilot project, this does not at all mean that the euro and Swiss franc wCBDCs will actually be released on the markets in the future.
It is merely a technical demonstration not only of the operational feasibility but also of the effectiveness of using similar instruments. The decision as to whether or not to actually release them on the market is not a technical one, but a political one.