(Kitco News) - The Bank of Spain (BDE), the country’s central bank, has revealed its intention to launch a pilot program for a wholesale central bank digital currency (wCBDC) and is calling for interested financial institutions and technology solution providers to join its trial.
Wholesale CBDCs are a digital representation of fiat currencies hosted on a distributed ledger network that are exclusively handled by banks and financial institutions for the purpose of improving payment infrastructure and interbank settlement.
According to a translation of the bank’s announcement, it intends to evaluate the ability of a wCBDC to increase efficiency and security in financial markets.
“The fundamental objective of central banks is to determine the effective capacity of these digital assets to increase the efficiency, agility and security with which financial market infrastructures operate.” the bank said. “In addition, their study can help to quantify to what extent they can contribute to adapting these channels to the needs and demands of an increasingly digital society.”
The BDE also stressed the fact that this program is not related to the ongoing trials of the digital euro, saying it “is an exclusive initiative of the Bank of Spain, limited to evaluating the real possibilities that the w-CBDC, in accordance with the current state of technology and its reasonable evolution over time.”
The three main goals of the trial are to simulate the movement of funds using a wCBDC; “experiment with the integration of a wCBDC with the liquidation of financial assets”; and “analyze the possible advantages and disadvantages of the introduction of a wCBDC with respect to traditional processes, procedures and infrastructures.”
Qualified parties interested in participating in the program have until January 31, 2023 to submit their applications.
The past few months have seen a host of central banks from around the world launch their own CBDC trials, exploring both wCBDCs and retail CBDCs (rCBDC).
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In early November, the U.S. Fed announced the successful completion of the first phase of a wCBDC trial, dubbed Project Cedar, and went on to launch the second phase a couple of weeks later. Project Cedar is the inaugural study being conducted by the New York Innovation Center (NYIC) in conjunction with the New York Fed, and is intended to explore fundamental design choices and modular technical features of a possible U.S. CBDC. Security, speed, interoperability and ledger design are key areas of focus for the research.
The U.S. Fed has also launched a 12-week pilot project in collaboration with commercial banks to trial a proof-of-concept project exploring “the feasibility of an interoperable network of central bank wholesale digital money and commercial bank digital money operating on a shared multi-entity distributed ledger.”
The Reserve Bank of India (RBI) also launched a wCBDC pilot project at the beginning of November, which was followed by the launch of a rCBDC trial at the beginning of December. So far, the trials have had limited success, with participants saying that the new system is actually less efficient and more cumbersome than the system currently in use.
Other countries that have recently announced CBDC trials include Pakistan, Indonesia, Ukraine, the EU, Canada, Dominica and Japan.
