In recent years, there has been plenty of talk regarding the potential of traditional banking systems in a digital token environment. In other words, this included a detailed exploration of how a digital token currency represents a national fiat currency inside of a setup that is very similar to bitcoin, but not a digital native one. The same applies to the possibility of that particular blockchain network being decentralized – the banks did not want the same element for their digital currencies.
But, besides the elements that these banks would never take on with their networks, it is abundantly clear that many nations are actively developing this possibility. PBoC in China has been working on a digital yuan for several years now and most analysts agree that it will have a solution ready before anyone else. However, it is not the only horse in this blockchain race. All big nations and financial powerhouses like India, the US, and Russia are working on some form of a solution that would allow them to migrate the traditional fiat currency to a fully digital blockchain setup.
Besides the technical challenge of having such a network up and running, there are also legal and regulatory restrictions, political pressures, and many more elements that are hindering the smooth development of any such system. But, besides the previously mentioned nations and the fact that making something like this is very demanding, it appears that the same race just got its latest addition. This comes in the form of the European Union and its euro, all through one of the members of the same political and economic block, who is trying to explore how this currency could go both digital and into a token form.
Eesti Pank Project
Eesti Pank is the name of the Estonian central bank. It is currently undertaking a research project that will last for several years. Its aim is to investigate the possibility and sustainability of a digital currency working on the blockchain principle. The bank revealed this in a news release that came out recently and it gave more detail about the technical backdrop of such a project. The network core of a digital currency would be the KSI Blockchain.
This system is already a part of Estonia’s network and system used for its e-government. Unlike many other nations where esports are just getting started, Estonia already has a well-developed branch of digital government that is probably the most evolved out of all European Union nations. Now the project of the Central Bank seems to be one that tries to blend this tried and tested system with a blockchain digital currency.
Digital Euro Uses
The central bank is mainly trying to develop ways of how a digital euro could be used in conjunction with the existing governmental digital system. This would include payment, transactions, and other regular financial functions that any additional government and its banking system have on offer. However, the digital ledger and other elements of native digital currencies would be employed instead of the traditional means of following and settling movements of money.
The same approach is very much in line with the general consensus that most government and banking systems have when it comes to moving beyond the traditional fiat currency setup. An additional benefit in the case of a digital euro would be the fact that it is already a much more decentralized setup than other national currencies, especially when compared to things like the US dollar. Also, the fact that so many national governments are included in the way the euro is run and governed opens the way for building off a digital and partly decentralized network.
Old Government Fears
Despite the forward-thinking nature of such a project, the digital euro still comes with a range of elements that make it more similar to things like the USD than to bitcoin. First of all, all the networks would be closed and contain space without any ability to communicate directly with other digital currencies especially those that are non-government issued. This means that there would be no options when it comes to taking those digital euros and transforming them into things like BTC tokens or any other cryptocurrency.
Furthermore, the decentralized element is only a necessity of this particular form of crypto governance. Members of this financial block would still be the only shot-callers in the actual process of maintaining and running the digital euro network. The same goes for the way the network is maintained and kept operational in a technical sense. It is hard to imagine any moment then a digital euro would use mining rigs like those of the centralized cryptocurrencies. Instead, the complete network infrastructure would be located in the jurisdiction and direct control of national governments.
Along with all of its limitations, the fact that the Eurozone and its members are trying to do something about the question of migrating this fiat currency to the digital space is a very commendable thing. Also, the fact the same is being done inside of the most developed digital government nation of Europe shows that the euro block is serious about this possibility. Naturally, despite this all of the bureaucratic red tape that the European Union is famous for little likely presents themselves sooner or later. That would include a very prolonged and very cautious development process any form of digital euro would be at least five to ten years away.
Of course, even that timeline is technically possible only if the political consensus is there as well. In the present state of the European Union and the euro block members, that consensus is almost always very far away. It would be foolhardy not to expect the same problem with the digital euro network. But, for starters, there is at least the fact that the present research project is undoubtedly in great hands. That alone place is the digital euro momentum likely ahead of any other western digital national currency. If the same momentum is maintained it could prove itself to be a huge game-changer for any nation in the euro block.