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Canadian bank took a significant step in exploring the technical feasibility of the digital Canadian dollar and proposed a specific system designed for retail digital currency Central Bank (CBDC) focused on simple and daily payments, according to a New research article.
The central bank research team examined OpenCBDC 2PC, a model developed in cooperation with the Institute for the Massachusetts Institute of Technology. This design prefers privacy, speed and decentralization by allowing users to hold digital funds directly, similar to digital cash.
New research comes after Canadian bank stated Shift its focus from the retail CBDC last yearHe says it was prepared if people from the nation decide that such a product is needed in the future.
Personal Data Protection Problems
The main focus of the report is privacy, which is not a big surprise, because CBDC has caused debate around the world, partly due to fear that could allow state supervision over financial activities. Unlike cash, which is anonymous, CBDC could theoretically allow central authority to monitor every transaction.
The report proposed that the system separates personal identity from transaction data, allowing unregistered users to keep funds in self -confident wallets. Users could then transact without sharing their identity with a bank or payer processor. Even for registered users, the central bank would not have access to identification information or the history of transactions.
The report goes further and proposes increased protection potentially by means of cryptographic techniques, such as zero knowledge evidence to cover the amount of transaction from the basic infrastructure. These functions collectively offer the level of privacy that the authors claim that they could exceed the level of current electronic payment systems.
Bitcoin structure
Unlike traditional banking systems where money is stored in user accounts, the report proposes a proposal that uses “unchanged transaction outputs” (Uxos) – structure more commonly associated with bitcoins.
The system processes transactions in two steps: updating the basic book and transfer of funds from one user’s wallet to another. This approach supports real -time settlement and offers a higher degree of privacy from banks and government institutions.
Challenges
While the report sets out a detailed technical solution of the potential digital Canadian dollar, it also identifies potential obstacles.
One of the main obstacles is that the integration of the proposed architecture into the existing retail payment infrastructure could require considerable technical improvements, even in the way the terminals at the point of sale are processed by digital cash transfers.
In addition, while the system is theoretically scalable, performance drops during audits and system recovery operations need further engineering work to meet standards at production level.
The post clearly states that this is not a commitment to launch CBDC. However, the finding sets a specific technical basis for what such a system might look like – one that compensates for the user’s privacy, institutional inspection and operational resistance.
Whether the central bank introduces it, the question remains, given the controversy surrounding the CBDC. However, the timing of the report could be right, because the new Canadian Prime Minister Mark Carney was quoted in his book 2021 as a supporter of CBDC.
“The most likely future of money is Stablecoin Central Bank, known as the digital currency of the central bank or CBDC,” wrote in his book.
