France’s Central Bank Grapples with Digital Payment Revolution Amidst U.S. Policy Shift
PARIS – The Banque de France is actively navigating the rapidly evolving landscape of digital payments, addressing both the opportunities and risks presented by technological advancements and a shifting global order.Concerns over financial stability and European sovereignty have been amplified by recent policy shifts in the United States, pushing the central bank to proactively adapt and innovate within the payment ecosystem, according to a recent address.
Driven by digitization and the proliferation of new technologies, the payments sector has undergone dramatic transformations in recent decades. Card payments now account for over 48% of transactions in France, with cash payments dwindling to 43% in 2024, down from 68% in 2016. The explosion of e-commerce, accelerated by the COVID-19 pandemic, has further fueled this trend, with online transactions now representing roughly a quarter of all transactions in France. Contactless and mobile payments have also gained notable traction, streamlining the payment process for consumers.
However, this digital revolution presents several critical challenges. The Banque de France is notably focused on ensuring the ongoing effectiveness and security of payment systems while bolstering Europe’s sovereignty over its financial infrastructure. Key concerns include the decline in cash usage, raising questions about the preservation of its unique attributes like confidentiality and worldwide accessibility, which are not readily replicated in the digital realm. The growing reliance on non-European entities for payment solutions, particularly those from the U.S. and China, also poses risks to competition, strategic autonomy, and data protection.”Financial authorities have an important role to play in bringing stability and confidence to the actors of the French and European economy and financial system during a time of heightened uncertainty,” the banque de France stated. “Our goal is to maintain stable access to financial services, and in particular to encourage innovation, diversification and mastery of the sources of financing for our economy and the infrastructures on which they rest, foremost among which is our payment system.”
The rise of tokenization, utilizing distributed ledger technologies (DLT) like blockchain, offers significant potential for faster transactions, reduced operational costs, and increased openness.Though, the proliferation of uncoordinated DLT initiatives and the emergence of private settlement assets, particularly stablecoins largely backed by the U.S. dollar, raise concerns about fragmentation and potential instability.
A recent executive order in the U.S., which discourages the progress of new forms of central bank digital currencies while promoting dollar-backed stablecoins and the use of public blockchains, has further heightened concerns about European monetary sovereignty. This policy shift underscores the need for Europe to develop its own autonomous payment solutions.
To address these challenges, the Banque de France is employing a multi
