The Bank of Canada took a significant step to explore the technical viability of a digital Canadian dollar, proposing a specific system designed for a digital centers with a retail central bank (CBDC) Focused on simple and everyday payments, according to a new research work.
The Central Bank research team examined OPENCBDC 2PC, a model developed in collaboration with the Digital Division initiative of the Massachusetts Institute of Technology. This design prioritizes privacy, speed and decentralization by allowing users to have digital funds directly, as well as digital cash.
New research occurs after the Bank of Canada said it is changing its approach to a retail CBDC last year, saying that they were prepared if the nation’s people decide that this product is necessary in the future.
Privacy problems
An important approach to the report is privacy, which is not a big surprise because CBDC have caused a debate throughout the world, partly about concerns that they could allow state surveillance of financial activity. Unlike cash, which is anonymous, a CBDC could theoretically allow a central authority to track each transaction.
The report suggested that the system separates the personal identity from the transaction data, allowing unregistered users to maintain funds in self -odled wallets. Users could make transactions without sharing their identity with a bank or payment processor. Even for registered users, the Central Bank would not have access to identification information or transaction records.
The report goes further, proposing improved protection through the potential use of cryptographic techniques as zero knowledge tests to obscure the amounts of central infrastructure transactions. These characteristics collectively offer a privacy level that, according to the authors, could exceed that of current electronic payment systems.
Bitcoin similar structure
Unlike traditional banking systems, where money is stored in user accounts, the report suggests a design that uses “non -spent transaction outputs” (Utxes) – A structure most commonly associated with Bitcoin.
The system processes two steps transactions: update a major book and transfer wallet from one user to another. This approach supports the agreement in real time and offers a greater degree of privacy of both banks and government institutions.
Challenges
While the report establishes a detailed technical solution to a potential Canadian digital dollar, it also identifies possible obstacles.
One of the main obstacles is that the integration of the proposed architecture with the existing retail payment infrastructure may require substantial technical updates, even in the way in which the point of sale terminals handle digital cash transfers.
In addition, although the system is scalable in theory, performance falls during audits and system recovery operations need more engineering work to comply with production degree standards.
The document clearly establishes that this is not a commitment to launch a CBDC. However, the findings have a specific technical basis for how this system could be seen, one that balances the privacy of the user, institutional control and operational resistance.
If the Central Bank will implement it, it is still a question, given the controversy that surrounds CBDC. However, the time of the report could be correct since the new Prime Minister of Canada, Mark Carney, was summoned in his book 2021 as a supporter of CBDCS.
“The most probable future of money is a stable of the Central Bank, known as the Central Bank or CBDC digital,” he wrote in his book.