Spain's Central Bank Confirms Partners as It Advances toward Wholesale CBDC Testing

Spain’s Central Bank Confirms Partners as It Advances toward Wholesale CBDC Testing

| Updated
by Temitope Olatunji · 3 min read
Spain’s Central Bank Confirms Partners as It Advances toward Wholesale CBDC Testing
Photo: Depositphotos

After an open call for collaborators, Banco de España chose local banks Cecabank and Abanca, along with UK-based blockchain company Adhara Blockchain, out of 24 total applicants.

The Banco de España, Spain’s central bank, has selected three partners to collaborate on testing a central bank digital currency (CBDC) over the next six months. The wholesale CBDC pilot aims to simulate interbank payments and settlements using both a single tokenized CBDC and multiple CBDCs issued by different central banks.

After an open call for collaborators, Banco de España chose local banks Cecabank and Abanca, along with UK-based blockchain company Adhara Blockchain, out of 24 total applicants. The Cecabank-Abanca consortium will use the simulated wholesale CBDC to settle a tokenized bond as part of the experiment.

While Cecabank and Abanca are based in Spain, the selection of Adhara Blockchain reflects the global scope of CBDC development. The company has also previously worked with central banks in other countries to explore digital currencies.

Importantly, this pilot is distinct from the digital euro project that would cover all eurozone member states if implemented. The Banco de España program focuses specifically on digitizing interbank wholesale payments rather than creating a broad-based digital currency. Nonetheless, Spain appears committed to preparing for future CBDC adoption.

CBDC Interest and Adoption Face Challenges in Spain

When the Banco de España released materials explaining the potential uses and economic impacts of the digital euro, it didn’t generate much excitement among everyday people in Spain. According to a survey conducted in 2023, 65% of respondents stated that they wouldn’t use a digital euro alongside their regular payment methods if it became available. This suggests that although central banks and financial institutions see potential in wholesale central bank digital currencies (CBDCs), there may be obstacles to their adoption by the general public.

One of the main challenges for introducing CBDCs is overcoming public skepticism and smoothly integrating them into existing payment systems. Unless there are clear advantages over conventional electronic payments, consumers and businesses might prefer to stick with the technology they are already familiar with.

Current Wholesale CBDC Experiments Explore Settlement

The goal of the partnership is to simulate how banks can settle transactions using tokenized digital currencies. This aims to enhance the speed and efficiency of settlements, which can improve liquidity and credit provision between financial institutions. If successfully implemented, a wholesale CBDC could make interbank transactions faster and more transparent and reduce reliance on third-party settlement providers.

This would be an advantage over the current interbank payment systems, which often rely on outdated batch processing methods. Furthermore, the pilot program will explore how different tokenized currencies can interact with each other in various scenarios. As CBDCs are being developed and tested worldwide, achieving interoperability, or the ability for different CBDCs to work together seamlessly, is becoming increasingly important.

Central banks likely remain years away from deploying live, large-scale CBDCs, even as experimentation expands. Yet many see digital currencies as inevitable given the steady digitization of finance and money. For now, the Banco de España’s project provides another stepping stone in the path toward mainstream CBDC adoption. But it also raises critical questions about how central banks should design digital money systems to enable innovation while ensuring stability.

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