Omidyar Network invests in tech enabling central banks to issue digital fiat currency

Omidyar Network invests in tech enabling central banks to issue digital fiat currency

EBay founder Pierre Omidyar's investment vehicle Omidyar Network has pumped money into eCurrency Mint (eCM), a Dublin-based outfit developing technology that enables central banks to issue digital fiat currency.

Unlike Bitcoin and other private sector cryptocurrencies, eCM's eCurrency is issued by a central bank and has the same legal and monetary status as notes and coins. The firm says that its offering is more than a ledger, combining hardware, software, and cryptographic security protocols to enable central banks to not only issue digital fiat currency, but also fully manage its operation, including the ability to monitor its movement through payments systems in near-real time.

Omidyar Network, through its financial inclusion initiative, has led eCM's Series C funding round. Although the size of the investment has not been revealed, eCM says that it will help it make its technology available to central banks around the world.

ECM has not publicly claimed any clients for its technology but the Bank of England and Bank of Canada have both been exploring the potential for bank-issued crytptocurrency. The BofE's chief economist recently floated the prospect of abolishing paper cash and replacing it with a state-backed digital currency as a way of facilitating negative interest rates, while a senior researcher at the Federal Reserve Bank of St Louis has suggested a possible government-backed 'Fedcoin'.

ECM's eCurrency can only be minted by the central bank in an offline process, with each unit consisting of a “cryptocomplex”: a self-contained security instrument that cannot be counterfeited or compromised. After deployment, eCurrency’s security features can be updated in real-time in order to stay ahead of counterfeiting threats.

Once each unit of eCurrency has been created, it is transported in digital form within a secure storage device to payments systems, such as banks, using the same delivery mechanisms available today for notes and coins. Those institutions then load eCurrency into their systems, making it available publicly for transacting.

Because each unit of eCurrency is equipped with a self-aware, unique identifier, the central bank can monitor its movement through payments systems in near real-time and continuously add up the money supply to ensure that the amount issued is the same as the amount in circulation at all times.

By replacing cash, eCM claims that digital currency boosts financial inclusion and saves taxpayers money, with minting and distribution costing just a tenth of the cost of producing cash. Developed based on feedback from central banks and successfully piloted in several countries eCurrency also "works seamlessly across all existing payments systems and current infrastructures, and it can be customized to comply with nation-specific security and regulatory frameworks".

Tilman Ehrbeck, partner, Omidyar Network, says: "Paper-based money is becoming an antiquated tool in an increasingly digital economy. Those who rely heavily on cash to conduct their financial lives are often locked out of the formal financial system and the opportunities it presents. ECurrency can help accelerate financial inclusion by turning today’s digital value systems into sovereign-backed national currencies, increasing trust, and addressing key issues currently hindering the adoption of digital value systems, such as interoperability."

Comments: (2)

A Finextra member
A Finextra member 10 December, 2015, 14:27Be the first to give this comment the thumbs up 0 likes

"a Dublin-based outfit developing technology that enables central banks to issue digital fiat currency."

Brass plate only in Dublin I'm afraid it seems.        504854

Actually based in California it seems , looking to hire Engineers on the cheap in the bay area :D

A Finextra member
A Finextra member 11 December, 2015, 14:47Be the first to give this comment the thumbs up 0 likes

There is no question in my mind that digital currencies will eventually replace the physical cash of all nation-states. Given the substantial suite of security and auditorial capacities claimed by eCurrency Mint, and that it is a tenth of the seigniorage (cost to produce) of physical money; these developments simply cannot be ignored forever. Digital currencies are simply too efficient to be ignored and will become a ‘must have’ for any society looking to secure the integrity of its fiat currency.

Once a particular digital currency has been rigorously assessed by various academics and/or high-ranking public servants, together with lots of debate and discussion by members of the public that is hopefully assisted by the quality end of journalism, digitised fiat currencies will become more commonplace amongst the community of nation-states. They will become a normal alternative to physical money. The above article is an important report.