Platform Will Help Develop Balance Between Privacy and Regulatory Compliance

The European Central Bank (ECB) has included blockchain platform COTI Network among the participants in the new phase of digital euro development—the so-called “sandbox.” The company, which previously collaborated with the Central Bank of Israel, has joined a select group of approximately 70 organizations that will conduct practical testing of technological solutions for the Eurozone’s future digital currency. The selection of COTI, which specializes in private Web3 payments, may indicate the ECB’s desire to find a compromise between growing requirements for financial transaction transparency and the need to preserve user confidentiality in the context of increasingly stringent cryptocurrency regulations in the EU.

COTI Among ECB “Pioneers”: A New Stage in Digital Euro Development

COTI Network’s inclusion in the ECB sandbox represents significant recognition of the company’s technological expertise in digital payments. The sandbox is a controlled environment for testing innovative solutions in real or near-real conditions, allowing assessment of their functionality, security, and compliance with regulatory requirements.

Among other program participants are major players such as audit company KPMG and Erste Group Bank, as well as dozens of fintech startups specializing in various aspects of digital finance. The total number of organizations involved in the project reaches 70, highlighting the scale and significance of the ECB initiative.

“Creating a sandbox for testing the digital euro is a critically important step from conceptual development to practical implementation,” comments Martin Klaus, financial analyst at Deutsche Bank. “The selection of participants demonstrates that the ECB aims to cover the widest possible range of technological approaches, from traditional banking solutions to innovative blockchain platforms.”

For COTI Network, participation in the European initiative opens opportunities not only to demonstrate its technological advantages but also potentially influence the architecture of the future official digital currency of one of the world’s largest economic blocs.

Experience in Private Transactions: Why COTI Was Chosen

COTI’s selection for participation in the ECB sandbox was not coincidental. The company has significant experience in central bank digital currencies (CBDCs), gained through collaboration with the Central Bank of Israel on a pilot project for creating a digital shekel.

COTI specializes in developing solutions for private and fast transactions in the Web3 space. The company recently introduced a lightweight tool for confidential payments capable of integrating into the broader decentralized finance ecosystem.

“COTI’s technology stack offers an interesting hybrid approach combining elements of centralized and decentralized systems,” explains Anna Kowalski, researcher at the Center for Financial Innovation at Brussels University. “This potentially enables use cases that are difficult or impossible to implement using purely centralized or fully decentralized solutions.”

COTI pays special attention to scalability and transaction speed—critical parameters for any payment system aiming for mass adoption. The company has developed its own Trustchain consensus mechanism which, according to developers, can process up to 100,000 transactions per second—a figure significantly exceeding the capabilities of many traditional blockchain systems.

“Participation in the ECB sandbox is recognition of our technological approach and expertise in digital currencies,” stated a COTI representative in an official comment. “We hope to make a significant contribution to the development of the digital euro, especially in aspects related to privacy and transaction efficiency.”

Balancing Privacy and Regulations: The Key Challenge for the Digital Euro

Privacy remains one of the most complex and controversial issues in the context of digital euro development. On one hand, European regulators aim to ensure the new digital currency complies with personal data protection principles established in GDPR and other EU regulations. On the other hand, there are growing requirements for financial transaction transparency as part of efforts to combat money laundering and terrorist financing.

This regulatory trend is clearly demonstrated by the EU’s plans to ban anonymous crypto payments by 2027 and limit the use of private cryptocurrencies such as Monero and Zcash. In such conditions, COTI’s participation in digital euro testing could provide valuable information on whether privacy and regulatory compliance can be reconciled.

“The ECB faces a classic dilemma: how to preserve the advantages of cash in terms of privacy and anonymity, but simultaneously integrate the digital euro into the modern regulatory environment,” notes Jean-Pierre Dupont, former financial policy advisor to the European Commission. “Technical solutions that can provide conditional privacy—for example, anonymity for transactions up to a certain threshold—become critically important.”

Previous statements by ECB representatives indicated that the regulator is considering implementing a model with varying levels of privacy depending on transaction amount and other parameters. COTI’s technology, potentially capable of providing such flexibility, could prove useful in this context.

Experts also note that digital euro development is taking place amidst growing competition between global CBDC projects. China is already actively testing the digital yuan, and the US Federal Reserve recently announced acceleration of work on the digital dollar. In this geopolitical race of digital currencies, the EU aims not to fall behind while implementing a solution consistent with European values and regulatory principles.

“Europe wants to create a digital currency that is not just technologically advanced, but also embodies the European approach to balancing privacy and regulation,” emphasizes Klaus Müller, professor of financial law at Frankfurt University. “The selection of sandbox participants, including COTI, indicates the desire to find solutions reflecting this specificity.”

COTI’s inclusion in the ECB sandbox could be an important step both for the company, gaining access to the development of one of potentially the largest digital currencies, and for the digital euro project, which will benefit from experience and technological developments in private transactions. However, the final design of the digital euro, including the balance between privacy and transparency, will be determined not only by technical capabilities but also by political decisions at the EU level.