The Estonian central bank has launched a multi-year research project into the viability of a central bank digital currency. Known as Eesti Pank, the bank believes that a CBDC would give residents and businesses new ways to deposit and use money. The move comes just days after reports of its e-Residency scheme being linked to growing number of cryptocurrency fraud cases and the delisting of 500 digital currency startups in early 2020.
Eesti Pank will partner with two technology companies, SW7 Group and Guardtime, the bank revealed in its press release. The research project follows recent developments in the world of payments, with other central banks also launching similar projects, the bank stated. It cited the recent launch of a study project into CBDCs by the European Central Bank as a key factor in its decision.
The study will look into “whether a solution based on the KSI block chain of the basic technology of Estonian e-government would be theoretically suitable for running the central bank’s digital money infrastructure.”
Being a small central bank, Eest Pank chooses carefully which development projects undertaken by euro area central banks it can make a contribution to, the bank’s head of payment systems Rainer Olt stated.
He added, “Over the years, unique know-how has emerged in Estonia on how to maintain a secure, private and efficient e-government. Estonia’s unique wealth of experience provides a good impetus to launch a project with technology companies SW7 and Guardtime to explore technological opportunities. The latter is Estonia’s long-term cooperation partner in the field of the blockchain and the complete top in the world in its field.”
The research project will run for two years and will consist of several different phases, the bank revealed. In particular, it will focus on how it can build a “scalable, practical and cryptographically secure platform” that meets all the established digital money requirements.
The CBDC research project comes months after the Estonian government stripped 500 digital currency firms of their licenses. The unexpected cleanup was the government’s response to the country’s huge implication in the $226 billion Danske Bank money laundering scandal. Estonia’s Financial Intelligence Unit (FIU) claimed at the time that many of the delisted firms were not ‘subject to Estonian supervision and coercive measures.’
The research also comes just days after reports emerged linking Estonia’s e-Residency scheme to growing digital currency fraud. As CoinGeek reported, the FIU linked foreign companies owned by Estonia’s e-residents to some of the largest exit scams.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
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