Estonia Central bank, Eesti Pank has launched research towards developing a digital currency.
Agreement in place to develop CBDC
According to a press release by Eesti Pank, it has secured a partnership with tech firms Guardtime and SW7 Group to study the technical suitability of the underlying technology needed to operate a central bank digital currency (CBDC).
Estonia’s apex bank believes that the CBDC will enable individuals and companies to deposit and use money in a unique and digitized way.
The digital money issued by the central bank will bear similarities to cash and the central bank directly guarantees the value of the money.
Eesti Pank further stated in the report that the aim of the research project was to find out whether a solution based on the existing KSI blockchain technology would be suitable for running the CBDC infrastructure.
KSI blockchain is the blockchain network developed by the Estonian government. The research project will also be investigating which other novel payment solutions can be offered if eID and other Estonian government solutions were used.
European Union agreement spurring CBDC race across Europe
Estonia has joined the race towards developing its own CBDC following the publishing of a comprehensive report by the European Central Bank.
The EU apex bank highlighted the advantages and disadvantages of a digital Euro and also highlighted key areas in which it could impact the current financial sphere in the region.
Due to the rapid development of financial services and technology, consumers’ payment preferences have also changed and various central banks have started researching what could be suitable technologies for the introduction of digital money.
Estonia Central bank digital currency research will be the first for the apex bank towards harnessing the potentials of blockchain technology in the finance sector.
The research project will have several phases with a duration of 2 years. Within that period, the Eseti Pank hopes to develop a scalable and practical blockchain platform that meets its digital money demands.
Speaking on the development Rainer Olt the Head of Payment Systems of Eesti Pank believes that it is a great development for Estonia.
“As a small central bank, Eesti Pank carefully chooses which development projects of euro area central banks we can make a meaningful contribution to. Over the years, unique know-how has emerged in Estonia on how to maintain a secure, private and efficient e-government.”