Bank of Canada took an important step in search of a digital Canadian dollar technical viability, a retail central bank proposed a specific system designed for digital currency (CBDC) One according to simple, everyday payment focused on payment New research paper,
The Central Bank’s research team examined the OpenCBDC 2PC, a model developed in collaboration with the digital currency initiative of the Massachusetts Institute of Technology. This design preference users to keep digital funds, preference privacy, speed and decentralization, much like digital cash.
The new research has been said by Bank of Canada that it is focusing on a retail CBDC last year, saying that it was prepared that if the nation’s people need such a product in the future.
Privacy issues
A major focus of the report is privacy, which is not a great surprise because CBDC has sparked debate around the world, in part on those concerns they can enable state monitoring of financial activity. Unlike cash, which is anonymous, a CBDC can theoretically allow a central authority to track every transaction.
The report suggested that the system distinguishes individual identity from transactions data, allowing non-regional users to keep funds in self-customed wallets. Users can then 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 transaction history.
The report goes on, the core proposes potential protection using cryptographic techniques such as zero-knowledge proof to obscure the amount of transactions from the core infrastructure. These characteristics collectively provide a level of privacy that authors say that the current can exceed electronic payment systems.
Bitcoin
Unlike traditional banking systems, where money is stored in user accounts, the report suggests a design that uses “unpantred transactions output”. (UTXOS) – A structure is more commonly associated with bitcoin.
The system processes transactions in two stages: updating a core laser and transferring money from one user’s wallet. This approach supports real -time disposal and provides high levels of privacy from both banks and government institutions.
Challenges
While the report gives a detailed technical solution to a potential digital Canadian dollar, it also identifies potential obstacles.
One of the main obstacles is that the existing retail payment may require adequate technological upgradation to integrate the proposed architecture with the infrastructure, which involves handling digital cash-like transfer in point-off-cell terminals.
Additionally, while the system is scalable in principle, the performance dips during the audit and system recovery operation require further engineering work to meet the production-grade standards.
The paper clearly states that this is not a commitment to launch CBDC. However, the findings lay a solid technical foundation for such a system – a one that balances user privacy, institutional control and operational flexibility.
Will the central bank implement it, it remains a question, given the dispute around CBDC. However, the time of the report may be correct as the new Prime Minister of Canada, Mark Carney, was quoted as a supporter of CBDC in his 2021 book.
“Most likely to money is a central bank Stabecrim, known as a central bank digital currency or CBDC,” He wrote in his book,
