The Bank of Spain is interested in collaborating with organizations that may want to participate in an experimental test involving a wholesale CBDC (central bank digital currency).
The monetary authority stated that the new program is not related to the ongoing investigation into the launch of a possible digital euro.
It said that the purpose of introducing this experimental program was to explore the real benefits and possibilities that can be offered by a wholesale central bank digital currency (CBDC).
A CBDC for Spain
The central bank of Spain recently announced its plans of running a program for testing an experimental wholesale CBDC in the country.
On December 5th, the Bank of Spain issued a document in which it announced the new digital token program and it explained that the authority was looking for organizations and companies in the industry that may want to collaborate.
These organizations should come up with proposals on the matter and submit them to the Bank of Spain in order to participate.
However, the institution also gave clarification that the new program was separate from the ongoing research efforts of the European Union into developing a digital euro for the member states.
Instead, the goal of the new program is to highlight just how feasible it would be to use a central bank digital currency (CBDC) and also explore the benefits that it can provide in terms of the settlement.
The proposals
A deadline of January 31st has been established by the Bank of Spain for receiving proposals from companies and businesses interested in collaborating on the matter.
After the deadline, the bank would begin evaluating each proposal individually in order to choose. All proposals that are chosen will be executed within a duration of nine months.
This would begin on April 3rd, 2023, and would come to an end on December 29th, 2023. According to a document that elaborated on the selection process, the bank could decide to extend the time period, depending on several factors.
Wholesale currency
There are several countries that are currently running trial programs and experiments in terms of developing a CBDC and most of them are focused on developing a universal purpose currency.
However, the Bank of Spain is interested in developing a wholesale one, which would be helpful for banking institutions and allow them to settle financial transactions with each other.
The document that defines the program has been made public and it reveals that there are three key tasks that the experiment requires to be completed.
The first is to simulate transactions that use the wholesale CBDC and the second is to experiment with both liquid financial assets and the CBDC.
As far as the third one is concerned, it involves analyzing the possible pros and cons of using a wholesale CBDC as opposed to traditional methods of settlement.
It should be noted that the Bank of Spain did not provide details about what the future would be of a wholesale CBDC should the experiment be successful.
It also did not provide any details about its intention of introducing a similar currency for conducting interbank transactions.
The Reserve Bank of India (RBI) also introduced a pilot program for a wholesale CBDC in the country on November 1st and many other countries are also working on similar projects.