The European Investment Bank (EIB) has partnered with the Banque de France and the Banque centrale du Luxembourg to tokenize an MNBC and use it in a transaction. The latter was carried out in partnership with Société Générale and Goldman Sachs, which acted as custodians and account holders.
DLT technology adopted by banks
According to a press release dated November 29, the Banque de France and the Central Bank of Luxembourg worked together to support the European Investment Bank (EIB) in the framework of the Venus project.
Specifically, the project aimed to provide a digital representation of central bank digital currency (MNBC) in the form of tokens (tokenized). The initiative also saw the participation of Société Générale Securities Services (SGSS Luxembourg) as well as the European branch of Goldman Sachs, which held the role of depositary and account holder.
As their name suggests, central bank digital currencies represent fiat currencies (in this case the euro) in their digital form, and are currently being tested by various banks internationally for public or internal use. to facilitate and secure transactions. We invite you to read our article dedicated to MNBC to learn more.
In fact, the European Investment Bank issued a digital bond for an amount of 100 million euros using Distributed Ledger Technology (DLT), which was then settled within the day by central banks using tokenized MNBCs.
👉 To deepen – What are the risks of central bank digital currencies (MNBC)?
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MNBCs progress slowly
Note that this is a first for the economic ecosystem of the European Union : indeed, never before has a tokenized MNBC been used in the context of a transaction of this order.
In order for the bond to be settled on the same day as its issue, the various players had to set up a trust exchange mechanism between the distributed ledgers. thanks to the so-called Hashed TimeLock Contract (HTLC) functionalitya technical tool to ensure the security of a transaction thanks to the smart contract (it is used in particular on the Lightning Network).
Nathalie Aufauvrethe Director General of Financial Stability and Operations of the Banque de France, welcomed this trial which marks a small step towards the issuance of tokenized MNBCs and distributed via distributed ledger technology:
“It shows how digital assets can be issued, distributed and settled within the Eurozone, in a single day. The Venus initiative confirms that a well-designed MNBC can play a vital role in the development of a secure space of tokenized financial assets in Europe. »
Note, however, that MNBCs are still in their infancy and their democratization within the European Union remains far from certain.
Indeed, the precise cases in which they could be used have yet to be determinedand some players are concerned about a possible flight of capital from the banking system as we currently know it to external wallets.
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Source: Bank of France
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