Italian Banking Association trials two styles of wholesale CBDC

Last year the Italian Banking Association said it would trial a wholesale central bank digital currency (wCBDC), Project Leonidas, as part of a Bank of Italy’s sandbox. It released the trial results last week, declaring it a success. The primary benefits were atomic transactions, transparency and information traceability.

The tests were conducted in 2023 and planned before the Eurosystems wholesale DLT trials with central bank money were announced.

While other wCBDC trials often involve testing securities settlement, the ABI focused on the settlement of interbank transactions. It has the distinction of launching one of the first mass DLT banking deployments, Project Spunta, the interbank reconciliation process that went into production in 2020 with almost 100 Italian banks.

Unsurprisingly, Spunta featured in one of the two Leonidas use cases. Spunta uses DLT to automate interbank reconciliations, providing the balances owed or due between the banks. As part of Project Leonidas, a wholesale CBDC was used to settle the interbank balances automatically.

The second use case involved the automated settlement of Cash in Transit. Each bank holds cash in dedicated vaults handled by a Cash Handling Company. That way they can distribute cash to their branches. However, sometimes one bank is short and another has excess cash. So the money is moved between their vaults. That leaves a debt between the banks, which is usually settled with a wire transfer. For the trial, the interbank cash movement was automatically settled using the wCBDC.