Published official documents and correspondence
Digital Gel project
announcement - inviting digital currency innovators for PPP
The National Bank of
Georgia (NBG) is considering launching a publicly available Central Bank
Digital Currency (CBDC) to leverage new technologies, enhance efficiencies of
the domestic payment system and promote financial inclusion. The CBDC is a
direct liability of the central bank that can be used to settle payments, act
as a store of value and will have legal tender status. In this journey, NBG is
inviting technology firms, fintech companies, and interested financial
institutions to join efforts to explore the frontiers of financial technology
and solve technological, regulatory, and financial issues facing CBDC adoption
through a public-private-partnership (PPP).
NBG has the mandate to
maintain price and financial stability. The key instrument through which these
policies are maintained is central bank money - the Georgian Lari (GEL). The
rise of digital technologies underscores the necessity to update central bank
money - by creating a digital version of the GEL - to better serve the digital
economy and increase public policy efficiency.
CBDC holds the promise
to unlock the tremendous value of innovative business models for the benefit of
society. The introduction of CBDC could increase financial intermediation
efficiency, help introduce new financial technologies, facilitate financial
inclusion, and reach previously unbanked population. It could also increase
monetary policy efficiency by improving monetary transmission mechanism and
welfare effects for the society.
NBG shares the
principles outlined in BIS (2020) and aims to develop CBDC technology based on the following
- Modular approach. CBDC
features should promote and enable the rapid introduction of new fintech
solutions and additional digital GEL upgrades. It is essential to start
from simple solutions which can efficiently upgraded/updated and increase
the scale and scope of CBDC over time. Not all features outlined below are
necessary to be operational from the very beginning of live operations and
use of simple solutions could be reasonable. For example, starting with
synthetic CBDC, and later upgrade to full-fledged CBDC could be an option.
What is important is to maintain modular approach in this process for the
benefit of flexibility and risk management.
- Low cost.
Cost is a significant factor given the small size of the Georgian
financial market. Priority will be given to economical solutions with low
fixed and variable costs.
- Convenience for retail. The primary focus is retail consumers and Micro, Small,
and Medium Enterprises (MMSE). CBDC technology must be easy to use, with
different options for the end-users.
Settlements should be near-instant, and the system should support a very
large volume of transactions.
- Interoperability and coexistence. CBDC should not contribute to the fragmentation of
payments systems. It is essential to achieve seamless operation with other
payment systems, bank and card payments, Stable Coins, e-Money, and other
- Open technological architecture. The platform underpinning the CBDC should be
simple to integrate for commercial financial institutions and fintech
- Smart contract layer.
Should support the implementation of smart contracts and automatic
payments. For example automatic tax accounting and tax collection for
- Information layer.
Should support optional passing of information along transaction. For
example, receipt, transaction, and contract details.
- GDPR compliant.
CBDC parties should maintain control of the information passed via CBDC
transactions. The technology should ensure personal data integrity and
compliance with GDPR standards.
- Statistical information. CBDC should enable the collection of statistical
information without de-anonymizing personal information. For example, the
calculation of price indexes.
- AML/CFT compatible. Transaction
traceability should comply with AML standards especially FATF
Recommendation 16. The solution should seek an optimal balance between
ensuring privacy and AML/CFT risks.
- Cyber Resilience. The
system should be resistant to active operational threats, especially
- Offline payments. Ability
to make limited p2p offline transactions.
- Interest payments. CBDC should support interest payments to the owner of
the CBDC as well as interest rate tiering.
- Operational limits. There should be an ability to impose limits on
individual holdings and transactions.
- Operation approvals. Possibility
of multi-signature approvals for certain operations.
Due to the completely
new and potentially disruptive technology of CBDC, it is essential to ensure
sound risk management during the development process. There are many risks that
theoretical literature attributes to CBDC. There may be even more new and unforeseen
risks, which will only be found in a live and controlled environment. NBG aims
to use its Open Regulatory Framework tools, to facilitate CBDC development. For
example, NBG's RegLab facilities and its principles can be
utilized to insure a regulatory sandbox approach for CBDC developers. Rapid
live testing in a controlled environment should enable the agile development of
CBDC technology and an impetus to develop underlying technology to full
potential, enhancing risk management and user experience. Also, interaction
with the RegLab should help NBG to develop its regulatory approach and update
legal framework to enable smooth and sustainable CBDC technology operation.
Furthermore, as an option, the Digital Bank Framework, could be utilized to facilitate CBDC
CBDC's may become
essential for the financial ecosystem and spur private innovation and development
of new financial technologies. Therefore, full private sector involvement in
technology choices, interface design, customer management, KYC and AML/CFT,
regulatory compliance, and data management will be crucial. If you are
developing CBCD technology and are interested in joining us in this ambitious
journey, please contact us via the Financial Innovation Office at InnovationOffice@nbg.gov.ge. Please title the subject "PPP on
CBDC" and provide a brief introduction about your company and your
technology. Also, indicate whether you would like to offer solutions to a CBDC
operator or be an operator of CBDC. NBG will consider range of proposals that
facilitates the direct management of the CBDC by either the NBG or by a
regulated private company.