CBDC in Canada? Central Bank recognizes the technical path for Retail CBDC in new research research
The Bank of Canada has taken a significant step in exploring the technical feasibility of a digital canadian dollar, suggesting a specific system designed for a retail central digital currency (CBDC) Focused on simple, day -to -day payment, according to a New paper of research.
The Central Bank research team reviews the OpenCBDC 2PC, a model developed in collaboration with the Massachusetts Institute of Technology’s Digital Currency Initiative. This design appreciates privacy, speed and decentralization by allowing users to hold digital funds directly, such as digital cash.
New research will come after Bank of Canada says it is Its focusing focus is far from a retail CBDC last yearsaying it is ready if the people of the country decide such a product is required in the future.
Privacy Issues
One major focus of the report is Privacy, which is not a big surprise because CBDCs have led to a worldwide debate, in part of concerns that they can enable state monitoring of financial activity. Unlike cash, which is anonymous, a CBDC can theoretical to allow a central authority to monitor each transaction.
The report recommends that the system separates personal identity from transaction data, allowing unregistered users to hold funds in self-customied wallets. Users can transact without sharing their identity with a bank or payment processor. Even for registered users, the central bank will not have access to identifying information or transactions history.
The report is more, suggesting improved protection by the potential use of cryptographic techniques such as zero-knowledgeable proofs of fuzzy transaction amounts from the basic infrastructure. These features collectively offer a level of privacy that those with -set can exceed current electronic payment systems.
The structure like bitcoin
In contrast to the traditional banking systems, where the money is stored in the user’s accounts, the report suggests a design that uses “unspent transaction outputs” (UXOS) – a structure that is more frequently associated with bitcoin.
The system processes the transactions in two steps: updating one major ledger and transferring funds from one user’s purse to another. This method supports real-time settlement and offers a higher level of privacy from both government banks and institutions.
Challenges
While the report places a detailed technical solution to a potential Canadian digital dollar, it also recognizes potential barriers.
One of the major obstacles is that the integration of suggested architecture with the existing retail payment infrastructure may require a large technical upgrade, including the way point-of-sale terminals hold digital cash-like transfers.
In addition, as the system is measured in theory, the performance of the dips during audits and system recovery operations require additional engineering work to address grade-production standards.
The paper clearly states that this is not a promise to launch a CBDC. However, the findings place a concrete technical foundation for what a system looks like – one that balances user privacy, institutional control, and operational stability.
If the central bank is implementing it remains a question, due to the controversy surrounding the CBDC. However, the timing of the report could be correct since Canada’s new Prime Minister Mark Carney, was quoted in his 2021 book as a supporter of the CBDCs.
“The most likely future of money is a central Stablecoin bank, known as a central digital currency or CBDC,” She wrote in her book.
