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Spain’s Central Bank to Experiment With Wholesale CBDCs

According to the Bank of Spain, the study will help determine how well it can adapt to the “needs and demands of an increasingly digital society.”

The Bank of Spain (BDE), Spain’s central bank, has announced plans to launch an experimental program to begin testing wholesale Central Bank Digital Currencies (CDBCs) and is seeking collaboration proposals from local finance and technology institutions.

According to a translated Dec. 5 statement, the bank will focus on three main areas with the program, which seeks to simulate the movement of funds, experiment with the liquidation of financial assets, and analyze the benefits and drawbacks of introducing a wholesale CBDC to its current processes and infrastructure.

A wholesale CBDC is a digital currency that is typically used by banks to keep reserves with a central bank, as opposed to a retail or general-purpose CBDC that is available to the public.

The program is “exclusive” to the BDE, and it is unrelated to work being done in the European Union to investigate the use of a digital euro.

Interested parties must meet the minimum requirements set by the bank and disclose the “economic means” they are willing to commit to the project in an application process that closes on January 31, 2023.

In justifying the program, the BDE stated that studying CBDCs can help determine how much they can contribute to “adapting to the needs and demands of an increasingly digital society.”

It also stated that CBDCs are being “analyzed and experimented” with in a number of jurisdictions, primarily for retail applications, but that more companies are delving into those “of a wholesale nature or interbank.”

At a central bank conference on December 8, Brad Jones, Assistant Governor of the Reserve Bank of Australia (RBA), stated that a retail CBDC could result in people avoiding commercial banks entirely and potentially displace the Australian dollar.

According to Jones, the RBA’s Australian dollar eAUD CBDC trial, which began on August 9, has seen over 80 financial entities propose use cases, but banks may face liquidity issues if a CBDC becomes the preferred source of holdings.

The Bank of Thailand (BOT) also plans to launch a retail CBDC pilot before the end of 2022, with a testing population of 10,000 people.

This comes after the Bank of China launched the first trial of its e-CNY in April 2020, which is now the most widely used CBDC in the world, with $14 billion in transactions recorded during its pilot phase.

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