Today the Bank of Lithuania unveiled a paper which reviews the Central Bank Digital Currency (CBDC) initiatives around the world. Yesterday, the Bank unveiled its LBCoin, a digital collectible coin commemorating the 1918 independence of the country. The document issued today clarifies that the LBCoin is a controlled CBDC experiment.
As part of the European Union monetary system, the Bank of Lithuania is not in a position to issue a full CBDC on its own. Other Euro countries, such as France are also exploring CBDC as well as the European Central Bank (ECB).
Talking about its LBCoin experiment, the bank says: “The approach is borrowed from the regulatory sandbox concept of the supervisory unit of the Bank of Lithuania. In this case, a niche area of numismatics has been identified as a playground with controlled risk for the central bank and potential retail users.”
It continues: “Multiple valuable legal, technological, cybersecurity and other issues have been encountered and resolved providing invaluable steep learning curve.”
Many central banks and the Bank for International Settlements (BIS) have published papers about CBDCs. Given it’s an overview, the Bank of Lithuania’s document may be a little more accessible than others. It rightly emphasizes that every country considering a CBDC is likely to have unique requirements which must influence the design of its CBDC.
After reviewing the available literature, the authors conclude that most of the research and implications focus on a single particular jurisdiction. This contrasts with increased globalization and the level of interest that Facebook’s Libra garnered.
Referring to a CBDC for several jurisdictions or a multicurrency CBDC the paper states: “one might argue such a currency could be a perfect solution to address in particular the issue of cross-border payment efficiency and would therefore deserve a more thorough discussion among academics and policy makers.”
And it concludes: “Multicurrency CBDC would help to avoid the danger of “digital dollarization” and a race among central banks.”
The publication also includes an exploration of the implications of a CBDC on financial stability and monetary policy.