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France’s CBDC May Have an Edge Over China’s e-CNY

A recently-completed trial of a blockchain-based central bank digital currency (CBDC) by the Banque de France could have a competitive edge over China’s digital yuan (e-CNY), a new Forbes Digital Asset research has shown. 

The study says the French CBDC could trump China’s head start because of its ability to function in the debt market, a key sector for the global economy. This is unlike the e-CNY’s traction whose focus is on domestic use cases “especially given the recent policy trends banning other cryptocurrencies in favour of the e-CNY.”

The e-CNY is the first CBDC to be launched after years of development even though its official white paper was just released in July of 2021. It has been in trials since the spring of 2020 across major Chinese cities. 

According to figures made available by Mu Changchun, the director-general of the People’ Bank of China’s Digital Currency Institute this week, 140 million individual wallets (almost sevenfold increase since June) and 10 million corporate e-CNY wallets have been created as of Oct 22.

He puts the transaction volume at a total of 150 million at a value approximating 62 billion yuan ($9.7 billion) as he speaks at a forum of the 2021 Hong Kong Fintech Week via video. About 1.55 million merchants can now accept e-CNY wallets to cover utility payment, catering services, transportation, shopping and government services, Mu said. 

Through the mBridge m-CBDC project that was jointly created by monetary authorities from China, Hong Kong, Thailand and the United Arab Emirates for cross-border payments, Mu also talked about at least 15 potential applicable business use cases and new progress in testing.

He touched on how the project – which China joined in February – lays out trial transactions on international trade settlement which has a total of 22 private sector participating from four jurisdictions and 11 industries with a total amount of more than 2 billion yuan ($312.6 million) payments tested so far.

Yet, the Forbes report maintains that “no other CBDC pilot to date has successfully experimented” in the debt markets to the extent of the Banque of France and its collaboration with major global stakeholders including the Monetary Authority of Singapore (MAS). 

Before the July 2021 cross-border payment and settlement system simulation with MAS in which a Singapore Dollar (S$) CBDC was converted to a €uro (EUR) CBDC nearly instantly, the Forbes research says France had already processed $2.4 million in simulated share issuances in an interbank settlement use case.

With the least privileged e-wallet account only requiring a phone number so it would be anonymous even to the PBoC and daily transaction values capped at CNY5,000 and annual at CNY50,000, Forbes Asset argues that China’s stance with respect to its e-CNY highly favours the local economy and its centralized government oversight hence not likely “to be seamlessly interoperable with other CBDC networks, which would be key for widespread global adoption.”

The French CBDC was issued for government bond deals over a 10-month period in France’s debt markets, the study says. The experiment saw the CBDC used to settle trades of crypto-OATs, government bonds represented as security which in turn led to other market activities like new bond issuance, repurchase agreements, coupon payments, and deal redemption. 

“What marks this trial as a distinctive step toward CBDC developments is that it tested most central bank and central securities depository processes in a way that successfully removed intermediary steps (e.g., reconciliation between market intermediaries).”


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