The European Central Bank (ECB) is forging ahead with its plans for the Digital Euro, aiming for an early 2026 launch. In a move to facilitate the smooth rollout of the digital currency and ensure optimal performance, the ECB is selecting several infrastructure providers. The goal is not only to ensure smooth implementation but also to build a robust system that prioritizes users' privacy and complies strictly with regulatory standards.
Among the chosen organizations is COTI, a blockchain startup known for its privacy-focused solutions. The ECB will be utilizing COTI’s offering, which leverages Garbled Circuits technology for advanced privacy protection. This will be instrumental in developing conditional payments for the Digital Euro.
Essentially, “conditional payments” are transactions where assets can only be exchanged once certain criteria are met and validated. Imagine an online marketplace scenario. A buyer’s payment is released only after they confirm the quality and delivery of the product. COTI’s solution ensures that sensitive data remains private throughout this process. This allows users to confirm the legitimacy of the transaction without exposing personal information, such as their identity or banking details.
In the context of the Digital Euro, this is crucial as the ECB is focused on creating a digital version of cash that can be used just like physical money, but in a secure and decentralized manner. With over $15 trillion flowing through the euro-area economy, such a payment system would be a private and simple alternative to the existing digital payment methods, which are often fragmented and inefficient.
Announced on Friday, May 5, the ECB's partnership with COTI will see them contribute to developing a technology that can process a large volume of transactions in a timely manner. This is crucial for ensuring the smooth operation of the Digital Euro system. Moreover, the partnership will focus on ensuring the privacy and confidentiality of user data during transactions. In today's world, where data privacy is becoming increasingly important to consumers, this aspect of the partnership is significant.
The partnership with COTI builds upon the startup's previous work with the Bank of Israel on its own central bank digital currency project. Last year, COTI developed a proof-of-concept demonstrating how CBDCs could be used to enable trustless transactions across borders, showcasing the potential of blockchain technology for international payments. This experience has now been recognized by the ECB, leading to a broader collaboration.
In addition to COTI, the ECB has also partnered with Hedera Hashgraph, Kima, Quant, and Ripple for the Digital Euro project. Each partnership brings unique expertise to the table, collectively aiming to build a comprehensive and advanced digital currency system.
