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A worker at the Lithuanian mint holds a silver coin, produced to be exchanged for sets of digital currency released by Lithuanian central bank in Vilnius, Lithuania June 1, 2020. Lithuania is about to issue the first central bank-produced digital coin in the euro zone, part of a project to trial state-backed digital currencies and blockchain technology in everyday use.

Lithuanian central bank to issue digital coins

Image credit: Andrius Sytas | Reuters

According to a Reuters report, Lithuania will be the first country in the eurozone to support a central bank-issued digital currency.

Next week, the Bank of Lithuania will issue 24,000 blockchain-based digital tokens called “LBCOINSs”. They will be sold in packs of six for €99. Each of the coins will feature a portrait of one of the 20 men who signed Lithuania’s declaration of independence in 1918. The tokens will be divided into six categories according to the signatories’ varying areas of activity.

The coins are intended largely as collectors’ items, like limited edition stamps or Pokémon cards. The bank expects users to trade them – either with the bank or in private blockchains – to build a set of tokens (one from each of the six categories). A complete set can be exchanged for a physical silver “coin” resembling a credit card and with a nominal worth of €19.18 to commemorate the declaration of independence.

The Bank of Lithuania has said that the use of LBCOIN as a means of payment “is not encouraged”; this should be seen as a trial for state-backed digital currencies.

According to Marius Jurgilas, deputy government of the bank, the announcement of Facebook’s ambitious Libra digital payment project – as well as the sudden decline in cash use amid the coronavirus pandemic – motivated central banks to seriously consider establishing their own digital currencies.

“No one in the central bank community was thinking about digital currency seriously before we realised that there is a legitimate threat that someone else will take our space,” Jurgilas told Reuters. “We need to provide society with what it wants.”

He explained that LBCOIN is similar to a central bank digital currency (CBDC): traditional money in digital form, issued and overseen by central banks. While many cryptocurrencies such as Bitcoin and Ethereum are decentralised – with transactions verified and stored on a distributed ledger – there will be a significant degree of central control over LBCOIN.

“At a time when central banks are beginning to change their thinking on digital currency, LBCOIN is probably the most advanced experimental playground to test different reincarnations of the CBDCs,” said Jurgilas. He opined that CBDCs had the potential to transform the role of banks when it comes to processing payments.

Earlier this year, Beonwould need to be introduced very carefully to avoid destabilising the monetary system.

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