Lithuanian central bank issuing first-ever digital collector coins
The Central Bank of Lithuania has announced that it will issue digital collector coins in 2019. These are not suggested to be used as legal tender. What is their primary purpose?
By exploring the possibilities of issuing the first ever digital collector coin we aim to mark the centenary of the restoration of Lithuania’s statehood, which we are celebrating this year, as well as show the world that Lithuania is a progressive and innovation-fostering country. In addition, the issuance of the digital collector coin would be yet another step towards implementing one of the Bank of Lithuania’s strategic directions in the field of innovation and FinTech.
Over the last two years, the BoL has been avidly researching blockchain possibilities. The digital collector coin project would only add to our understanding of the potential that lies within blockchain.
Could you briefly elaborate on the blockchain sandbox platform LBChain and its operations?
Having received EU funding, in March 2018 we announced the launch of the LBChain project, which is expected to run for roughly 1.5 years. The pre-commercial procurement, organised by the BoL, is aimed at acquiring R&D services from external suppliers, and ultimately creating the blockchain-based platform-service. If all goes to plan, by the end of next year the BoL will introduce a regulatory blockchain-based sandbox, which will allow companies specialising in blockchain-based solution development to test their creations in a BoL-controlled environment. As a supervisory authority of the financial market, the BoL will also provide them regulatory support.
What is the Central Bank of Lithuania’s position regarding ICOs?
The amount of successful ICOs by local companies is impressive and Lithuania stands at the forefront of the ICO phenomenon.
Therefore, as a regulator of the financial sector, we cannot afford to be inactive. We have been closely monitoring the market and are collaborating with other authorities, like the State Tax Inspectorate and the Ministry of Finance, to provide guidance for market participants that have already engaged or wish to engage in ICO activity. Nonetheless, as investment in ICO tokens causes significant risk, we urge consumers to be cautious.
As regards regulation, the BoL’s position on ICOs stands in line with the position of the European Security and Markets Authority – pure utility tokens are basically outside the scope of regulation. Tokens that have security features are treated the same as ordinary financial instruments.
From the central banker’s perspective, what is the most interesting aspects of currencies based on DLT technology?
The idea of private money issuance is not new. Blockchain allowed us to easily transfer private money worldwide and, most importantly, eliminate the central counterparty from the asset transfer process. Currently, private cryptocurrencies, primarily due to their limitations and the efficiency of the current European money system, do not pose any threat for official currencies. Therefore, those that voice concern are mostly regulators and not central bankers – since cryptocurrencies are mainly used as speculative or investment products, not as a substitute for money.
Central banks around the world are exploring the possibilities of using blockchain as an underlying technology for the issuance of central bank digital cash. In this regard, as well as for payments and other purposes – like identification, voting, registers, and so on – we see a lot of potential in blockchain.
Does the Central Bank of Lithuania have any plans on developing a digital currency as well following the minting of the collector coins?
The BoL is part of the Eurosystem, hence decisions regarding the issuance of digital cash should be taken together with other euro area central banks. Embarking on the digital collector coin project, we aim to determine the pros and cons of blockchain for digital currency purposes.