The Bank of Canada announced a collaboration with the Massachusetts Institute of Technology (MIT)..The research project would be a one-year contract primarily to build on the Bank of Canada’s ongoing wider research agenda into digital financial technologies and a central bank digital currency (CBDC)..The bank will co-operate with the Canada Digital Currency Initiative (DCI) at MIT Media Labs to look at how “advanced technologies could influence the possible design of a CBDC.”.“The Bank of Canada and the Massachusetts Institute of Technology (MIT) today announced an agreement to collaborate on a 12-month research project on Central Bank Digital Currency (CBDC). The bank will work with the MIT Media Lab’s Digital Currency Initiative team to explore how advanced technologies could affect the potential design of a CBDC, building on the DCI’s ongoing research into CBDC. This exploration will help inform the Bank of Canada’s research effort into CBDC,” the bank’s press release said..The agreement follows one week after US President Joe Biden signed an executive order on the responsible development of digital technologies that asked the Federal Reserve Bank to evaluate whether it should create its own digital currency..“(The project) 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,” said the release..“As part of OpenCBDC, DCI’s open-source code base and research initiative, DCI aims to fill this gap by engaging technologists, user researchers, central bankers, private sector leaders, and academics in service of a more accessible, trusted, fair, and resilient economy. We don’t yet know if or in what contexts CBDCs can help improve the broader international monetary system, or how they might be best designed to do so, but we believe engaging in technical research is an important step in answering these questions,” it said on the MIT Digital Currency Initiative website regarding the announcement..“The MIT DCI’s interest in this collaboration with the Bank of Canada stems from a desire to have, as much as possible, a hand in ensuring that neutral, responsible research is being done with this technology before any policy decisions are made. Building and implementing helps us understand the problems and challenges better, putting us in a unique position to help shape a CBDC that emphasizes privacy, user agency, and financial equity,” MIT said on the web page..According to the Bank of International Settlements, 80% of of central banks across the world are researching or conducting pilot studies on CBDCs..A central bank digital currency would allow people to have an account at the central bank itself. In its research, policy-developers are seeking information about what quantity CBDC, in terms of value, people would be comfortable holding in those accounts and what design the digital architecture should have. .A CBDC would form an integral part in the financial system and its processes in terms of payments and banking and, more generally, total demand and supply in the economy. .The Bank of Canada must consider these consequences in its determinations about whether it should issue a digital currency. If it were to adopt a CBDC, the question would be whether its use would be more akin to the way cash is used, or would the asset be primarily bank-based? .In February 2020, the Bank of Canada planned how it was “building the capacity to issue a retail, cash-like CBDCs.” The bank’s plan was a “contingency.” The bank admitted at the time “significant work” was needed to acquire this state of readiness..“People expect money to be safe and available to everyone. In addition, payments are increasingly expected to be fast, efficient and flexible. This is evident from the steady decline in the use of cash as consumers switch to card and electronic payments. At the same time, new alternative digital currencies are being created, with characteristics quite different from those of conventional money,” the central bank said on its website two years ago..“In the years ahead, the bank will conduct its work on a CBDC in a transparent manner, with regular consultations with stakeholders at home and abroad and public presentation of conclusions and issues, as they emerge,” the central bank noted at the time..“The Bank of Canada will provide an update on the findings and outcomes at the end of the project period,” the Bank of Canada said at the conclusion of its Wednesday press release..Amanda Brown is a reporter with the Western Standard.,.abrown@westernstandardonline.com
