The move is a segment of the Bank of Canada’s attack into CBDCs
Three Canadian universities have shared proposals in reference to a digital currency model.
The Bank of Canada held a university contest in 2020, the Model X challenge, whereby the participants were required to layout an assumptive central bank digital currency. While two approaches rally for a tokenized layer, all advocate for an account-based solution.
University of Calgary participants noted the tension in some of the objectives aired by the bank. For instance, unrestricted anonymity gives way the legal compliance in anti-money laundering policies. The proposal from the university is a two-tier path. It suggests Banking+ in conjunction with an account-centric version of CBDC. This is similar to banking with additional smart contracts. Legal assent is heightened in instances where a person converts money from Banking+ to Cash+.
McGill University focused on addressing privacy issues in CBDC. While the account-based model has pros, it has privacy issues in comparison to anonymous tokens. This is because each transaction can be tracked. The move is great for anti-money laundering. However, it is invasive in comparison to cash. Tokens are also hard to track. As such, they can present other issues such as tax avoidance and money laundering issues.
University of Toronto and York University advocate for a two-stage approach consisting of two layers. Primarily, this includes a centralized account-based solution. In this approach, all payments made are amidst fully financed digital currency wallets where connectivity to existing payment rails would be facilitated through APIs.
The second phase would comprise a permission blockchain. This will enable smart remittances to act as a blanket on top of the centralized solution. York University and the University of Toronto recommend a national digital identity initiative. This will enable all wallets to pass through an e-KYC process. The transactions, however, will adopt a quasi-anonymous identifier.
We’ve reported that the co-founder of Ukraine’s largest mobile bank invested in Bitcoin.