Exclusive: Banque de France Eyes Ethereum for Onchain Repo Markets

Banque de France is developing a prototype for a blockchain-based repo market that runs entirely on public infrastructure, according to sources familiar with the matter.

Central bank officials presented the architecture in a closed-door session on July 18 at the Caisse des Dépôts, outlining the use of permissioned lending pools to automate collateralized lending flows between institutions.

Repurchase agreements (repos) are a foundational pillar of modern financial markets, enabling trillions in short-term secured lending. Banque de France identified several structural pressures on existing repo infrastructure, including rising interest rates, the end of the Eurosystem’s TLTRO program, and the lack of efficient intraday liquidity tools, that make a redesign worth exploring.

Onchain repos, they argued, could automate settlement, margining, and collateral management through smart contracts, reducing the need for intermediaries.

Stablecoins and money market funds involved

The focus on building on Ethereum marks a departure from the Banque de France’s previous experiments, which were largely confined to private or permissioned networks. “But so far, these have shown their limits in terms of distribution and interoperability,” several sources close to the matter explained.

The choice of cash leg also reflects a shift in approach. Unlike previous Banque de France experiments that relied on a wholesale CBDC, the prototype leans on stablecoins, with EURCV and USCV, issued by Société Générale’s blockchain arm SG-Forge, under consideration for settlement.

On the collateral side, the Banque de France is notably in talks with Spiko, a Paris-based fintech operating Europe’s largest tokenized money market fund (EUTBL), which currently manages €241 million in assets.

To enable the core lending logic, the prototype explores the use of Morpho Blue, a modular protocol developed by DeFi startup Morpho Labs, another French player. Its design allows institutions to spin up custom lending vaults with optional KYC.

Permissioned access

While the solution would be deployed on a public blockchain, access to this REPO market would be restricted to whitelisted participants. According to our information, the Banque de France is also working on developing its own permissioning framework. Compliance checks are embedded into smart contract wrappers, allowing verification to travel with the asset, a feature it refers to as “conformité programmable.”

One unresolved question is whether the forked Morpho protocol will run on Ethereum mainnet or an EVM-compatible Layer-2. “Privacy considerations are still being assessed at this stage,” a source told Blockstories.

Full-scale experimentation is expected to begin by the end of 2025. “Many details still need to be worked out, such as regulatory oversight. But the idea is indeed to build a repo system fully based on a permissionless blockchain, while remaining compatible with the requirements of financial institutions,” a source involved in the planning told Blockstories.