ESTCoins Can’t Happen, Says ECB President

“No member state can introduce its own currency,” said Mario Draghi, president of the European Central Bank. The statement came as a response to a question about ESTcoins (Estonia’s proposed national cryptocurrency) at a press conference that was held after the ECB Governing Council’s meeting regarding monetary policy.

ESTcoins were proposed in late August by Kaspar Korjus, managing director of Estonia’s e-Residency program, which allows for the existence of a class of “digital residents” of sorts, who don’t necessarily live in Estonia, but enjoy the benefits of being a legal resident while boosting the Estonian economy. 

The ESTcoin would have provided a way for Estonian residents and e-residents to quickly and securely process transactions with the Estonian government, as well as other financial entities. Additionally, the ESTcoin ICO would have provided a quick avenue for large amounts of money to flow into the little country at unprecedented rates.

It’s easy to see how national cryptocurrencies could threaten the strength of the Euro, if they were ever adopted for any kind of widespread use. However, it’s clear that the financial systems of EU and countries all around the will need to evolve to keep up with the technologies that exist in the rest of the economy.

Small DLT Projects Popping up, but EU Keeping Blockchain at an Arm’s Length

While ESTcoins remained a mere concept, the idea of national cryptocurrencies has been slowly churning through the rhetorical gears of countries and government institutions all around the world. One smaller scale example is Finland’s recent launching a blockchain-based credit and ID card for asylum seekers.

Adoption of blockchain technology into the existing financial systems of the European Union could stand to make many financial services cheaper, quicker, and more secure, but the EU is hesitant to start using the technology until more is understood about it. A statement in the European Central Bank’s annual report this year said:

“The ECB is open to considering new ways to enhance its market infrastructure. However, any technology-based innovation would have to meet high requirements in terms of safety and efficiency … At this stage of its development, [distributed ledger technology (DLT)] is not mature enough and therefore cannot be used in the Eurosystem’s market infrastructure. As DLT-based solutions are constantly evolving, the ECB will continue to monitor developments in this field and explore practical uses for DLT.”

The EU is also taking steps to tighten regulations surrounding existing cryptocurrencies and de-anonymize crypto transactions. Research firms, universities, and legal enforcement entities from Finland, the UK, Germany, Austria, the Netherlands, and Spain are teaming up under the TITANIUM (Tools for the Investigation of Transactions in Underground Markets) Project.

The TITANIUM Project, which was announced earlier this year, comes as a response to the widespread use of the internet and cryptocurrencies for nefarious purposes–specifically, the WannaCry ransomware that disabled thousands of computers spread across more than 150 countries.

Earlier this year, an EU directive proposed a more direct approach to dealing with criminal practices surrounding cryptocurrency that would, in essence, ban all anonymous cryptocurrencies from the EU. The directive stated that cryptocurrency anonymity is “more a hindrance than an asset” for most users.

While at this point, it seems unlikely that such a widespread ban would actually go into effect, the rising political turbulence in the EU could lead to a wide range of legislation intended to prevent terrorism.