After conducting a recent experiment with the digital euro, the Central Bank of Estonia concluded that this blockchain-based currency would be highly scalable and would be able to process an unlimited number of payments easily. The ECB, along with central banks from a number of other European countries, participated in this test. Another aim of the test was to highlight that the carbon footprint of digital currency is significantly smaller, as opposed to card payments. This experiment was part of the ‘Investigation Phase’ which was launched recently as part of the euro project. It was able to establish that a blockchain-based solution for introducing a digital version of Europe’s common currency could support a nearly unlimited number of payments simultaneously.
The test also showed that the technology would also be helpful in maintaining a good balance between meeting anti-money laundering requirements and maintaining privacy. The Central Bank of Estonia published an announcement on its website where it praised the test results. Participants of the experiment included Eesti Pank and seven other Eurozone’s member states, which include Latvia, Spain, Greece, Germany, Ireland, the Netherlands, and Italy. The European Central Bank (ECB) was also one of the participants. The Governing Council of the ECB gave permission in mid-July to make further preparations for the digital euro.
However, they have not yet taken a final decision regarding its introduction. The purpose of the trial was to come up with a technical solution for introducing a central bank digital currency (CBDC). The experiment included using digital money for making payments between digital entities from Spain, Lithuania, Latvia, and Estonia. The digital euro system being tested was proven capable of performing more than 300,000 payment transactions simultaneously in a second and it took less than two seconds for the funds to reach the recipient.
According to the Estonian regulator, the carbon footprint of this digital currency turned out to be a lot smaller than that of the existing card payment system. Eesti Pank also added that experts were able to overcome some of the previously identified bottlenecks. The experiment highlighted the employed blockchain technology’s high scalability, as the number of payments made with the digital euro can be increased easily if needed. It was also noted by the central bank that no limits are imposed by the ‘innovative’ technology on the money supply’s size. It elaborated that the system was able to manage the whole euro supply and more.
As part of the Investigation Phase of the project, additional trials will also be conducted and Eesti Pank fully plans on participating in them. The ECB is interested in bringing in more payment service providers and banks and will also conduct a number of user surveys. This will help them in examining the options of issuing a digital currency. This stage is expected to go on for about 24 months and financial authorities will work on figuring out the kind of infrastructure that would be required by the digital currency of the Eurozone.