Major Canadian universities have submitted new research to the Bank of Canada centered on developing a central bank digital currency, or CBDC, confirming the ongoing innovation in this area.
The research began last year after BoC engaged four organizations on potential designs for a national digital currency. A total of three proposals were posted simultaneously on Thursday. Notably, each proposal was based on the application of blockchain technology.
The submission from the University of Calgary takes advantage of “a combination of distributed ledger technologies (DLTs) and electronic cash (” electronic cash “) with advanced cryptography fundamentals. The submission places great emphasis on promoting universal access to the CBD, especially in remote communities, as well as ensuring strong privacy protections consistent with Canada’s civil liberties.
A design from McGill University in Montreal focuses on “asymmetric privacy between recipient and sender of money”. Researchers have shown that protecting privacy is essential to avoid price distortions and enhance the integrity of the classic demand for money function.
A joint presentation by the University of Toronto and York University promotes a supported “Know Your Customer” approach to increasing financial inclusion and protecting economic sovereignty during the emergence of disruptive technologies such as the Internet of Things and artificial intelligence. According to this approach, digital Loonie will be launched in two phases, starting with the creation of “digital cash with authentication protocol” followed by programmable electronic cash on the basis of “blockchain as shared resource”.
Upon reporting, the Bank of Canada confirmed that it is “intensifying contingency planning for a central bank digital currency,” but that it currently has no plans to issue one. However, some voices within the BoC are adamant that the country needs a so-called “digital madman” sooner rather than later.
In a speech on Wednesday, Deputy Governor Timothy Lin said the COVID-19 pandemic has accelerated the need for a digital currency:
“The epidemic may lead us to the decision point sooner than we expected.”
South of the border, US central bankers are also expanding their research into central bank digital currencies. Economists at the Federal Reserve have released several research papers exploring drivers of the value of the digital dollar, although no formal decision has been made on its publication.