European central banks cut out consumers to fast-track digital currency

While central bank digital currencies are still years away in most countries, a project in central Europe that focuses on large commercial banks could provide a faster way to market.

Called Project Jura, it includes the Banque de France, the Swiss National Bank (SNB), Bank for International Settlements Innovation Hub and private-sector banks including Credit Suisse Group and UBS Group. BdF will issue a euro wholesale version of a central bank digital currency, which will be swapped for a Swiss Franc wholesale CBDC from SNB as part of the test over the next few months.

Dozens of countries are testing or developing both retail and wholesale CBDCs, with most projects still in pilot or earlier stages. But Project Jura is a wholesale CBDC, which is designed for financial institutions that have reserve deposits at a central bank. It thus has a simpler stakeholder structure and can potentially wield a lot of influence on how commercial banks engage with central banks in the future.

By contrast, retail CBDCs face the same challenges associated with any digital payment, such as money laundering controls, interoperable authentication for millions of users and providing scale for a disparate population.

“Wholesale CBDCs tend to be more contained given the stakeholders involved, which will inevitably be highly regulated and known parties, namely commercial banks and financial market infrastructure players,” said John Velissarios, CBDC lead at Accenture.

A wholesale CBDC uses a digital token to transfer value, replacing the traditional system in which central banks debit and credit accounts for cross-border interbank payments but don’t transfer value in real time.

The Banque de France is working with partners including the Swiss National Bank, Bank for International Settlements Innovation Hub, Credit Suisse Group and UBS Group on Project Jura, a wholesale version of a central bank digital currency.


Lots of research, proofs of concept and pilot work has happened during the past few years with CBDCs, and the focus has ebbed and flowed between retail and wholesale, Valissarios said. “International finance and specifically cross-border payment applications make [wholesale CBDCs] highly relevant and likely to be the area of broader adoption of CBDC,” Valissarios said.

In the case of Project Jura, tests include a payment versus payment (PvP) transaction involving a euro and Swiss digital currency in a cross-border trade. In a foreign exchange settlement, PvP is used to ensure a transfer of one currency occurs concurrent with a transfer of the other currency. The project will also test a delivery versus payment (DvP), which is a securities process that ensures the payment matches the transfer of securities.

Wholesale CBDCs support near real-time payments, with automated approval through the two central banks simultaneously. Digital currencies are designed to move faster and require fewer intermediaries and processing steps than traditional wholesale cross-border transfers, which could fundamentally change how international bank payments are processed if the concept becomes widely used.

“The central banks never lose oversight over the currencies with wholesale CBDCs,” said Todd McDonald, co-founder and chief product officer at the blockchain consortium R3, which is one of the private-sector participants in Project Jura, providing the underlying technology.

Project Jura, named for the mountain range on the Swiss-French border, is part of the larger Project Helvetica, which launched in Switzerland in 2020 as a joint initiative between BIS, the Swiss central bank and financial markets technology operator SIX to demonstrate use cases for combining tokenized assets and central bank money.

There’s a similar project involving central banks in China, the United Arab Emirates and Bank for International Settlements. Called the mCBDC Bridge, it will develop a prototype for real-time cross-border foreign exchange transactions over multiple jurisdictions at all times.

CBDCs won’t be successful unless they can be used for international payments, said McDonald, whose R3 has also worked on a has also worked on a project involving Sweden’s Riksbank, the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank the Federal Reserve, the Swiss National Bank and BIS.

The Riksbank project is focused on ensuring CBDCs can coexist with cash, support wider objectives, don’t harm monetary and financial stability and promote innovation. While these goals are necessary for both retail and wholesale CBDCs, they are likely more attainable for wholesale CBDCs in the near term.

The structure of a retail CBDC is subject to political squabbling over issues such as how consumers will access the central bank, the role of commercial banks, risks to banks such as mass withdrawals in favor of retail CBDCs, and the potential of a digital dollar to dilute the mission of government-supported faster payment processing. In China, which is expected to launch its retail CBDC well before the U.S., consumer privacy is a concern.

“There are fewer moving parts for wholesale CBDCs,” McDonald said. “In a place like Switzerland there are fewer people that need to get into a room to make changes.”

Larger cross-border payments can take up to two days to settle using traditional methods, causing delays that can be improved via faster processing. That shows a need for wholesale CBDCs, said Matthieu Saint Olive, product manager in ConsenSys’ Paris office. ConsenSys is supplying technology for the CBDC project and is involved with several other CBDC projects with a goal of furthering interoperability among national CBDCs.

ConsenSys additionally develops CBDC technology for projects in Hong Hong, Thailand, Australia, South Korea, South Africa, Singapore and France. It has partnered with the Blockchain Service Network to apply Quorum — a blockchain Consensys purchased from JPMorgan — to a national project in China.

“Most cross-border payments are more or less of a batch [processing],” Saint Olive said. “People don’t always know the status of the transaction.”

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