Komal Joshi · Oct 24, 2020 . 6min read
Europe’s Estonia launches Central Bank Digital Currency project
The Estonia's central bank unveiled a central bank digital currency research initiative to explore if its technology is perfect for CBDCs.
By Komal Joshi · Oct 5, 2020 . 5min read
The Central bank of Estonia, Eesti Pank, has launched a multi-year central bank digital currency (CBDC) initiative in collaboration with the technology companies Guardtime and The SW7 Group. It aims to research on the suitability of the Estonian e-government core technology for operating a central bank digital currency.
In accordance with the resolution taken last week by the Governing Council of the European Central Bank, the Euro area’s central banks will conduct collaborative research. It will determine the advantages and disadvantages of issuing central bank digital currency and potential digital currency solutions. It intends to investigate the effectiveness of KSI Blockchain, which is used in Estonia’s e-government solutions. An extension of exploring a digital money infrastructure will potentially consider new payment solutions that use an electronic identity. It will also include other Estonian e-government solutions.
Estonia to research on Central Bank Digital Currency for two years
The joint research program will run in multiple phases. According to the reports, the research may last for around two years. The first phase will concentrate on the architecture of a solution. It will discover how to develop a scalable, practically useful, and cryptographically secure platform. Therefore, meeting the requirements of a central bank digital currency. Moreover, this includes rigorous requirements for speed, security, privacy, and resilience.
The CBDC research project is a practical illustration of the central bank’s new strategic direction. It studies ways to collaborate with the private sector and research topics that will encourage Estonia’s financial and payment markets.
The European Central Bank published a complete report on Friday examining situations to contemplate introducing a digital euro. The report lays down the pros and cons of the digital euro in the various situations, different characteristics and options it could have. Moreover, it also includes the broader impact it could have on the financial system. Additionally, it also consists of the core activities of the central bank. However, Estonia sees itself as in a strong position as it has one of the most exceptional e-government infrastructures globally.
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