Deputy Governor for Bank of Canada on plans for a CBDC, Libra & Bitcoin mentioned – Oct 14 2020
Bank of Canada explains why it is afraid of anonymous CBDC
Top bank of Canada sees a threat in the creation of anonymous government digital currencies
The main issue is related to the CBDC usage and storage model
The bank still has to solve other technical problems before starting to create a digital currency
Canada’s regulator has identified the main risks associated with the potential issue of anonymous digital currencies from central banks
The Bank of Canada sees a threat in anonymous tokenized digital currencies of central banks (CBDCBoards and coins may be a thing of the past due to a new financial instrument – digital currency of central banks (CBDC). As … More). The country’s central bank said this in a report entitled “Security and Convenience of the Central Bank’s Digital Currency”.
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According to the regulator, anonymous CBDCs are dangerous due to the possibility of uncontrolled accumulation and storage of large balances. In addition, many risks are associated with the use of third-party services such as digital wallets or cryptocurrency exchanges. To mitigate these risks, the central bank is considering:
- limited storage of CBDC on wallets or limitation of transfers;
- creating rules of responsibility of the parties holding the CBDC;
- identifying basic security protocols for CBDC accumulation.
Ecosystem of intermediaries
So far, the central bank is considering a token-based CBDC model with private key support. The Bank of Canada admits that such wallets may not be suitable for everyone, but predicts the emergence of an ecosystem with public and private components for asset management.
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In total, the Central Bank of Canada is studying three CBDC storage models: based on address (the user stores the keys himself), digital wallet (key storage providers) or account (crypto exchanges / banks).
To improve security, Bank of Canada proposes to equalize liability for loss of CBDC with physical banknotes.
“If central banks establish liability rules for the loss of CBDCs similar to banknotes and traditional bank accounts, users will be incentivized to exercise greater caution when using CBDCs,” the report said..
The regulator acknowledged that the voiced nuances are far from the only ones, and in order to develop CBDC, the bank needs to study many other technical features..
In the meantime, regulators around the world are actively looking at the digitalization of the economy. In February 2020, for example, Bank of England Chief Cashier Sarah John urged to rush the development of a national digital currency due to the threat of losing leadership to private companies..
BeInCrypto previously reported that the European Central Bank has already entered the race to digitalize the economy. In particular, the Eurosystem will explore the potential use of distributed infrastructure in wholesale transactions to improve the efficiency and flexibility of payment systems and financial infrastructures..
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