Canada explores digital currency as Biden calls for US to examine its own options.
The Bank of Canada is teaming up with the Massachusetts Institute of Technology (MIT) to explore central bank digital currencies (CBDCs).
Canada’s central bank announced yesterday that it has struck an agreement with MIT Media Lab’s Digital Currency Initiative (DCI) to conduct a 12-month research project that will take a closer look at “how advanced technologies could affect the potential design of a CBDC.”
Amid the growing popularity of crypto, Canada and the US are far from the only countries to consider rolling out their own CBDCs.
The Bank of Canada-MIT project announcement comes shortly after United States (US) President Joe Biden made some significant moves on the crypto front. Last week, Biden inked an executive order calling on the American government to research the risks and benefits of crypto, and examine the potential of a US CBDC.
CBDCs are virtual currencies that are backed and issued by central banks. The new Bank of Canada-MIT project is part of the Bank of Canada’s broader digital currencies and FinTech research and development agenda.
According to The Logic, the Bank of Canada has been exploring the idea of a government-issued digital currency for years. The Bank of Canada says that, as of today, “no decision has been made on whether to introduce a CBDC in Canada.”
MIT Media Lab’s DCI conducts research to support the development of digital currency and blockchain technology, collaborating with other universities and research institutions to author research papers, run pilot use cases, and build open-source software.
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At an October 2021 event, Bank of Canada Deputy Governor Timothy Lane said the Bank of Canada was starting to build the capability to issue a CBDC, but noted that the central bank did not see “a compelling need under current circumstances” to distribute one. However, Lane said that this could change should the use of physical cash in Canada continue to decline.
Amid the growing popularity of cryptocurrencies and stablecoins, Canada and the US are far from the only countries to consider rolling out their own CBDCs.
According to the international affairs-focused American think tank Atlantic Council’s CBDC tracker, nine countries have fully launched CBDCs, including the Bahamas and Nigeria, while 15 others—like Sweden, Russia, Ukraine, and China—are in the midst of piloting their own digital currencies. Atlantic Council lists Canada as in the CBDC development process, and the US as at the research stage.
Among larger countries, China has led the charge towards CBDCs, and is currently ramping up its efforts to roll out its digital yuan to the wider Chinese population.
In last week’s executive order, Biden stated that the US will place “the highest urgency on research and development efforts into the potential design and deployment options” of its own CBDC.
Feature image from the Bank of Canada, via Flickr.