Bank of Canada Exploring CBDC Design with MIT

The Bank of Canada is teaming up with the Massachusetts Institute of Technology (MIT) on a 12-month research project that’s focused on the design of a potential Central Bank Digital Currency (CBDC), according to a Cointelegraph report Thursday (March 17).

Bank officials will work with MIT Media Labs’ Digital Currency Initiative (DCI) team to examine how “advanced technologies could affect the potential design of a CBDC,” the joint announcement Wednesday (March 16) says, according to the report.

The CBDC design collaboration, bank officials say, is “part of a broader development agenda on digital currencies, FinTech and how CBDCs could work in a Canadian context,” the report says, and the announcement stresses “no decision has been made on whether to introduce a CBDC in Canada.”

MIT published CBDC research at the beginning of February with The Federal Reserve Bank of Boston called “Project Hamilton,” which tested a “hypothetical general purpose CBDC” using two potential models including distributed ledger technology (DLT) and processing transactions in parallel on multiple computers rather than relying on a single ordering server to prevent double spending, the report says.

Earlier this month, U.S. President Joe Biden signed an executive order, Ensuring Responsible Development of Digital Assets, which says the administration will place “the highest urgency on research and development efforts into the potential design and deployment options” of U.S.-based CBDC.

It also ordered a research report on local CBDC from the Secretary of the Treasury and other relevant officials and says the attorney general must lead an effort to “to assess any necessary legislative changes” required for a CBDC and to craft the necessary legislation to enact them.

Related: CBDC Plans Proliferate as Governments Race to Challenge Stablecoins’ First-Mover Advantage

Many CBDC advocates see them as a way to improve the efficiency and reduce the costs and bottlenecks across the payments industry — and as a reaction to the growth of stablecoins including Tether’s USDT and Circle’s USDC. Stablecoins also present a challenge to fiat currency that CBDCs would eliminate, or at least decrease.