The Bank of Estonia (Eesti Pank) is launching a multi-year research project to assess the suitability of its e-Government technology in operating a central bank digital currency.
The initiative, in collaboration with the technology companies Guardtime, the long-term blockchain partner of the Estonian government, and The SW7 Group, will focus on a solution based on the KSI Blockchain, a core technology of e-government in Estonia.
The project will also examine new payment solutions that could be made possible by using identity and other Estonian e-government offerings, although it will stop short of making choices around the use of specific individual technologies.
From a wider perspective, the project is firstly a response to a report from the European Central Bank (ECB) earlier this month, assessing the reasons for and effects of a ‘digital euro.’ As the ECB assesses it, it would complement the current offering of cash and wholesale central bank deposits. Secondly, it is being seen as the first practical example of Eesti Pank looking to cooperate with the private sector to help develop financial and payments markets in Estonia.
The country, through its longstanding e-Estonia initiative, has become something of a gold standard for use of digital technologies in government. Estonia notes that almost half of the population participate in internet voting, for instance, while queries for its digital state services have almost quadrupled over the past two years.
Underpinning this is electronic identity, and this is an export industry for Estonia; through the e-Residency program, foreign companies can use it to transact with and participate in government services.
Ott Vatter, managing director of Estonia’s e-Residency programme, explained at the recent Blockchain Expo Virtual event how the original idea for ‘EstCoin’ was ‘completely misunderstood’ by the media at the time. The idea “that Estonia wanted to lose the Euro… was never the plan,” he said.
“Today this idea is hibernating slowly… but Estonia was in the forefront to really think what the token economy could hold. We’ll be seeing a lot of this innovation in the future.”
The joint research project is set to last for approximately two years across multiple phases. You can find out more here.