The Banque de France has completed the last of its interbank settlement in CBDC experiments, demonstrating the possibility of direct ledger interoperability in a hybrid cloud environment across multiple technologies and asset classes.
Launched in March 2020, the French central bank has been at the forefront of a prolonged programme to explore the potential of a digital euro, beginning with a series of tests across interbank settlement.
Conducted in association with HSBC and IBM, the latest test case consisted of the issuance of a digital bond on a blockchain and its subscription with a settlement in CBDC.
The programme entailed an end-to-end transactional lifecycle of digital assets, through issuance, subscription by several actors, and coupon payment involving a conversion into another currency. All those transactions occurred across different blockchain environments operated by HSBC for the custody of the assets, and by the Banque de France for the securities settlement and the CBDC. Distributed ledgers based on IBM’s Hyperledger Fabric and R3’s Corda were integrated using IBM Research’s Weaver interoperability tool.
Mark Williamson, managing director GFX eRisk, partnerships & propositions at HSBC, says: "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. Interoperability across different DLT’s 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.”
IBM's Weaver tool 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.
Nathalie Aufauvre, director general of financial stability and operations at the Banque de France, says: “Interoperability across platforms is a key element to maximize the benefits of the distributed ledger technology applied to financial markets. 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 coexist."
She says that the next tranche of the bank's ongoing CBDC experimentation will be mainly dedicated to cross-border transactions.