Experience gained through the LBCOIN project used to study the feasibility of a digital euro
Having issued the world’s first digital collector coin LBCOIN a year ago, the Bank of Lithuania applied the experience gained in the project in the digital euro feasibility study.
“The experiment showed that a decentralised two-tier payment ecosystem could be used for the digital euro, as by employing different payment technologies it ensures higher resilience and security. The model is open and highly flexible; besides, the expertise of the Bank of Lithuania has shown that any new system can be easily integrated in this model,” said Marius Jurgilas, Member of the Board of the Bank of Lithuania.
On 14 July, the Governing Council of the European Central Bank (ECB) has decided to launch the investigation phase of the Digital Euro Project. Since last September, the Eurosystem’s high-level task force on central bank digital currency (CBDC) launched experiments in the four following areas: the digital euro ledger, privacy and anti-money laundering, limits on digital euro in circulation, and end-user access.
The Bank of Lithuania contributed to the experiment implemented by a working group coordinated by the Banque de France and joining experts from the Banca d’Italia, Banco de España, Banque Centrale du Luxembourg, Banque Nationale de Belgique, the Österreischische Nationalbank and the ECB. The group studied a hybrid digital euro model to assess the interaction between the centralised and the decentralised payment systems.
LBCOIN, as one of the distributed ledger technology (DLT) systems (created based on the NEM blockchain technology), was integrated into a pilot digital euro payment system. The Bank of Lithuania successfully completed digital euro transactions from the LBCOIN system to the digital euro systems of other central banks that joined the pilot project. The payments were executed through TARGET Instant Payment Settlement (TIPS), a centralised platform managed by the Eurosystem.
The pilot exercise confirmed that third-party service providers could readily join the payment ecosystem via a single access point to both centralised and decentralised systems. That opens the way to providing a range of digital euro-related services (e.g. account and electronic wallet management, or payment automation).
Experts from the Bank of Lithuania are permanently engaged in the Eurosystem digital euro task force, and Marius Jurgilas, Member of the Board of the Bank of Lithuania, chairs the Central Bank Digital Currencies working group at the Bank for International Settlements.
Press release and report by the Banque de France