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Estonia Begins CBDC Research after Eliminating 500 Crypto Firms

Oct 8, 2020
Estonia Begins CBDC Research after Eliminating 500 Crypto Firms

A multi-year research project has been launched by the Central Bank in Estonia. The project is related to determining the volatility of a central bank digital currency (CBDC) for the country. Known as Eesti Pank, the central bank is convinced that both residents and businesses will be able to benefit from a CBDC, as it will provide new ways of using and depositing money. This move comes only a few days after a connection was identified between the increase in crypto fraud cases and Estonia’s e-residency scheme. Apart from this, Eesti Pank has also removed more than 500 crypto startups in the beginning of 2020. 

Eesti Pank published a press release in which it revealed that they would be partnering up with two technology companies for developing a CBDC, which are the SW7 Group and Guardtime. The bank said that they had launched this research project after some interesting developments were made in the world of payments. One such major development has been the launch of similar projects by central banks of other countries. A key factor that contributed to Estonia’s decision to study CBDCs is because even the European Central Bank has taken an interest in it. 

The study will focus on figuring out the merits of using such a solution that would be based on the KSI blockchain. It would also determine whether the CBDC will be capable of keeping up with digital money infrastructure of the central bank in Estonia. The study will be focused on the basic technology of Estonia’s e-government. The Head of Payment Systems at Eesti Pank, Rainer Olt highlighted how theirs was just a small central bank. Therefore, he said that they had to be very cautious when deciding which project deserves their contribution when looking over the various development projects that are taken on by the other central banks in the European Union.

Olt elaborated that over the years, Estonia had garnered a unique level of know-how when it comes to ensuring secure, efficient and private e-governance. He said that with such a wealth of experience, Estonia was capable of launching projects, such as this one. They would be exploring new technological opportunities with SW7 and Guardtime. Olt highlighted that Guardtime, in particular, had been their partner for the long-term in the blockchain field. He referred to it as one of the top companies in its field. This particular research project will go on for two years and will comprise of several phases. 

The primary aim of the project is to build a scalable, practical and secure platform that would be able to fulfill all the requirements of digital money that have already been established. This research project focusing on CBDCs is introduced only a few months after the government in Estonia had taken away the license of 500 digital currency companies. This huge purge came after the massive implication of the country in the renowned money laundering scandal of the Danske Bank, which was worth $226 million, and the government took action to prevent it from happening again.

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