Danny Nelson
Lithuania Is Trialing a CBDC No One Can Use – And That’s by Design
Lithuania’s central bank is one month away from minting money too advanced for nearly anyone to use.
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That’s because Lietuvos Bankas’ upcoming coinage is no pocket change or banknote – it’s a digital currency on the NEM blockchain. The Bank of Lithuania is issuing “LBCoin” tokens – a commemorative digital token exchangeable for physical legal tender – with technology its own officials say no shopkeeper has the e-wallet necessary to accept.
LBCoin’s planned July launch follows more than two years of blockchain experiments by the Bank of Lithuania, at a time when interest is mounting in central bank digital currencies (CBDCs).
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However, Lithuania’s plans for distributed ledger technologies stretch far beyond numismatic novelties. Since March 2018, the central bank has been teaching itself all about blockchain, said Head of Innovation Andrius Adamonis, who is also the bank’s blockchain project manager.
“[LBCoin] will be a very interesting project because some people say it’s like a small-scale experimentation about CBDC,” Adamonis told CoinDesk.
In addition to these collectible cryptos, blockchain sandbox LBChain demonstrated how Lithuania can foster and grow fintech startups. The Bank of Lithuania is now even more ambitious about blockchain, Adamonis said. He wants to pitch Lithuania’s ministries of energy and health on a cross-agency, multi-blockchain platform called LTChain that the whole government could use.
Fintech sandbox
That two-year LBChain project brought fintech companies onto closed blockchain testing environments by IBM Poland, which used Hyperledger Fabric, and Nordic IT firm Tieto, which trialed Corda.
LBChain’s 11 participating fintechs built blockchain-based applications for the financial sector. For example, Ledgity, a French project, ginned up a “Digital Private Bank” in IBM’s sandbox that streamlined enforcement of investing in tokens.
Other fintechs developed Credit Default Swaps (CDS) insurance smart contracts, blockchain-based RegTech programs and digital bond-buying platforms for their respective LBChain projects, to name a few. The project was implemented by pre-commercial procurement.
Some projects simultaneously demonstrated the value and market pitfalls of widely deploying blockchain tech. Adamonis noted that a shared know-your-customer (KYC) platform promised to let clients “move from one bank to another bank very easily” – a win for customers. But not the commercial banks who feared losing accounts to competitors.
“For us it was very good to experiment as a market regulator because we were using test money, dummy data,” Adamonis said.
Lithuania's blockchain future
LBChain’s three-phase research stage is now complete, meaning the stakes are about to get real. Adamonis said the bank is now preparing to take LBChain live with the public.
The sandbox will feature two cohorts of five fintechs building out applications in either Corda or Fabric over extendable six-month stints. Adamonis is open to adding more blockchain platforms to LBChain over time.
Tuesday, November 17, 2020