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Canada’s central bank collaborated with the Massachusetts Institute of Technology (MIT) to launch a twelve-month research project on central bank digital currency (CBDC). The study will inform the financial institution about the product’s potential merits and its possible implementation in the monetary network.
Bank of Canada Catches the CBDC Wave
According to a recent announcement, the central bank of Canada joined a number of countries that are already actively exploring CBDCs. Specifically, it partnered with MIT on a one-year research project to explore how “advanced technologies could affect the potential design of a CBDC.”
The initiative is part of the bank’s broader development agenda on cryptocurrencies and fintech. The institution said the experiment will follow how CBDC interacts with the financial system. However, whether a CBDC will be introduced in Canada or this is just a research project with no follow-up remains unknown. The central bank informed it will provide further details on the outcome at the end of the experiment.
CBDC is the digital form of a country’s fiat currency. Unlike the decentralized nature of private digital assets, it is totally controlled by the authorities. As such, it is no wonder that numerous politicians have argued that the financial product will be a better option than crypto.
Such is the case with the IMF’s Managing Director – Kristalina Georgieva. Last month, she suggested that a “prudently” designed CBDC could be “safer” than bitcoin and the altcoins, which are “unbacked” and “inherently volatile.”
India’s PM – Narendra Modi – is also keen on the product. In his view, it could strengthen the digital economy in the years to come and revolutionize the fintech sector.
Existing CBDC Projects in Other Countries
Canada is not the only nation to conduct such a trial on a CBDC. Not long ago, the Central Bank of Kenya (CBK) released a discussion paper to examine what the general public thinks on the matter. Locals are able to analyze both the pluses and minuses that such a product can lead to.
At the end of 2021, the Bank of Korea also carried out the first stage of its two-part mock testing of its CBDC. Earlier this year, the institution announced that the project is now in its second phase. The central bank teamed up with local monetary organizations to examine the actual launch of the product.
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