- The National Bank of Ukraine has revealed in an analytical report that it has used the protocol of Stellar Lumens for a pilot project of a central bank currency (E-hryvnia).
- The application software for the pilot project system is based on the Stellar SDK with the Stellar Core Horizon API.
A report by the National Bank of Ukraine reveals that the financial institution is in the process of developing a central bank digital currency (CBDC). The report details the stage and the progress made by the National Bank of Ukraine in the development of the CBDC, named e-hryvnia. According to the publication, the bank is using the blockchain technology of Stellar Lumens.
The report points out the main characteristics of the e-hryvnia. The institution states that its CBDC should be convertible into cash on a one-to-one basis with the hryvnia (currency of Ukraine). In addition, the report states that e-hryvnia functions as a medium of exchange. Furthermore, the institution is ruling out that it has other uses such as Bitcoin which is used as a store of value and an asset for speculation.
The platform that provides the basis for the digital central bank currency was built on a private version of the Stellar Lumen protocol. According to the financial institution, it chose Stellar after analyzing other networks and systems. It also notes that there was a main reason for choosing Stellar in the context of the development of the CBDC:
The decision was made after one of the project’s participants suggested to provide free-of-charge a ready-made basic solution of such a system to be used in the project on the Platform’s implementation with an option to finalize that basic solution in line with the requirements that would be established at the preparation phase of the Platform’s implementation.
Regarding the features of the platform on which the CBDC of Ukraine will operate, the financial institution specified that the system’s application software is based on the Stellar SDK network with the Stellar Core Horizon API. It also noted the challenges and limitations of the platform:
The main technological risk for development and distribution of the platform in its current version is that a private version of the Stellar blockchain protocol (which was brought in line with the NBU’s requirements) was used for the platform. Such version hampers (virtually prevents) the elimination of errors and vulnerabilities of the Stellar blockchain protocol as well as the development of the Platform’s functions as new options are being added to the basic blockchain protocol. Moreover, the private version of the blockchain protocol makes the system highly dependent on the company developing a certain protocol version (…)
The Institution therefore points out that these restrictions make it impossible for the time being to launch the CBDC at national level. The National Bank of Ukraine must weigh up the risk before proceeding with future developments. The National Bank of Ukraine has also revealed that it has issued a limited amount of the currency e-hryvnia and has managed to carry out the transactions in a lively environment”:
We drew useful conclusions as regards the issuance of our own CBDC and gained valuable practical experience that highlighted the NBU’s capabilities and potential to implement projects of this kind.