The central bank has in the past hinted that the launch of a CBDC in the neighboring US could be a catalyst for a Canadian CBDC.
The Central bank of Canada has announced that it will work with the Massachusetts Institute of Technology (MIT) to research Central Bank Digital Currencies (CBDC).
According to a March 16 press release, the Bank of Canada will work with the MIT Media Lab’s Digital Currency Initiative. The collaboration is set to last a period of 12 months. Findings of the research project will be revealed to the public after its conclusion.
The scope of the project will be the possible effects of advanced technology on the development of a CBDC. The project is expected to inform the Central Bank’s ongoing research into CBDCs. The bank underscored that it is yet to decide on the actual implementation of a state-regulated digital currency.
The press release reads in part:
“The project forms part of the Bank’s wider research and development agenda on digital currencies and fintech. It will focus on exploring and experimenting with potential technology approaches to determine how a CBDC could work. No decision has been made on whether to introduce a CBDC in Canada.”
Canada vs US: Race for CBDCs
The central bank has in the past hinted that the launch of a CBDC in the neighboring US could be a catalyst for a Canadian CBDC. This is due to the possibility of a sovereignty risk as US dollar use by Canadians might increase.
It remains to be seen what effect US president Joe Biden‘s digital assets executive order will have on the trajectory of Canada’s CBDC research. The executive order, in which Biden called on CBDC research to be done “urgently” will significantly expedite digital dollar research. Interestingly, MIT’s Digital Currency Initiative is also working with the US Federal Reserve Bank’s Boston branch on CBDC research in what is known as Project Hamilton.
Canada is in no way new to digital currency research. In 2020, the country’s central bank engaged teams from various universities in its Model X Challenge. The digital currency proposals were meant for the bank to use “to inform its thinking and advance public conversation on a central bank digital currency design.” The winning three papers were revealed early last year.
With governments concerned about the supposed risks caused by cryptocurrencies, central banks the world over are conducting CDBC research. The latest countries to announce CBDC research include the Philippines, Zambia and Brazil.
Mercy Mutanya is a Tech enthusiast, Digital Marketer, Writer and IT Business Management Student.
She enjoys reading, writing, doing crosswords and binge-watching her favourite TV series.
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