Lithuania’s central bank is taking the novel approach of launching what it believes is the world‘s first blockchain-based digital ‘collector’ coin as the Baltic state steps up its digital currency activity.
The ‘LBCoin’ will commemorate the country’s 1918 declaration of independence, and all 24,000 tokens – which are slated to be released in spring 2020 – will feature one of the declaration’s signatories, the Bank of Lithuania (Lietuvos Bankas) has announced.
Although the coin will not enter circulation nor serve as legal tender, it is a statement of intent that the country is looking to position itself as a trailblazer in the increasingly dynamic digital currency arena.
More than a token effort
The coins will be divided into six categories symbolising the declaration signatories’ areas of activity. People who buy the digital coins – available from the bank’s e-shop – will receive digital tokens. If they collect a token from each of the six categories, they will be able to redeem a physical silver coin.
The collectible coin represents “another step in implementing the Bank of Lithuania’s strategic direction in the field of innovation and fintech”, according to the bank, and is aimed at helping Lithuanian and international companies to “gain knowledge and carry out blockchain‑oriented research, thus adapting and testing blockchain-based services in the financial sector”.
The LBCoin owes its genesis to a ‘hackathon’ held in Lithuania’s capital, Vilnius, in 2018. At the time, the two-day event was described by the Bank of Lithuania as “the first step towards creating the state-of-the-art digital collector coin dedicated to the restoration of Lithuania’s statehood”.
Central bank digital currencies
Lithuania has also been working on establishing a technology platform and regulatory sandbox, known as LBChain, for testing digital ledger projects.
And, in a further digital initiative, the country’s central bank has this month also published research into the implications of launching a central bank digital currency (CBDC), including monetary policy and financial stability implications.
The 33-page document, ‘CBDC – In a Whirlpool of Discussion’, examines options including a so-called ‘synthetic’ CBDC, in which public and private sectors collaborate. The paper says that CBDCs could promote cross-border payments and financial inclusion, as well as providing access to basic payment services.
Lithuania, a European Union (EU) member with a population of about 2.7 million, adopted the euro currency in 2015. It was the last of the three Baltic states to do so, after Estonia (2011) and Latvia (2014). As part of the EU monetary system, the Bank of Lithuania is not in a position to issue a full CBDC on its own.
Explaining the country’s digital currency exploration to Global Government Forum, Bank of Lithuania board member Marius Jurgilas said: “Bank of Lithuania has taken a proactive role in gaining hands-on experience in practical aspects of CBDC.Sometimes we need to test certain implementations in smaller scale or close proximity areas. Development of a fintech-conducive regulatory and supervisory ecosystem, as well as fostering innovation in the financial system, is one of the Bank of Lithuania’s strategic directions.”
Jurgilas added: “Multiple valuable legal, technological, cybersecurity, and other issues have been encountered and resolved, providing an invaluable steep learning curve. This can be considered as an in vitro test of multiple aspects relevant to the CBDC discussion. Numismatics appears to be an ideal sandbox, with controlled risk for the central bank and potential retail users. Therefore, LBCoin provides an opportunity to test the potential benefits of technology and evaluate potential drawbacks in practice.”
Paulius Tarbūnas, head of fintech at Lithuanian ICT industry body Infobalt, told Global Government Forum: “For a while now Lithuania has been a frontrunner in fintech. The Bank of Lithuania actively supports the fintech ecosystem and is especially keen to stay on top of new regulatory challenges, digital currencies being one of them. This is why, in its efforts to stay as close as possible to new developments, the Bank of Lithuania plans to issue the world’s first digital collectors coin in early 2020, and also invites other regulators to join discussion on CBDC.”
Digital currencies in the spotlight
As the Bank of Lithuania’s discussion paper’s three authors acknowledge, CBDCs have been gaining significant attention among policymakers and academics.
Global Government Forum reported last month that the European Central Bank (ECB) is investigating how a European public digital currency (a ‘digital euro’) could work and whether it is desirable, with its conclusions expected next year.
Meanwhile, this month the Basel Committee on Banking Supervision has released an 18-page discussion paper entitled ‘Designing a prudential treatment for crypto-assets’, with 13 March 2020 the deadline for comments.
“While the crypto-asset market remains small relative to the size of the global financial system, and banks’ exposures to crypto-assets are currently limited, its absolute size is meaningful and there continues to be rapid developments, with increased attention from a broad range of stakeholders,” the paper says.