Canadian Central Bank Releases Extensive Report on Viability of CBDCs

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Bank Of Canada (Courtesy: Twitter)
Bank Of Canada (Courtesy: Twitter)

Central bank digital currencies, often known as CBDCs, are seemingly imminent: over recent months, central banks around the world have revealed that they are working on their own digital currency projects.

This trend is seemingly a response to the persistence of Bitcoin and other cryptocurrencies. This persistence may show central banks that they have something to be worried about, as they wouldn’t let a sovereign and anonymous cryptocurrency take over their own.

The ongoing central bank push to fully digitize their respective economies through CBDCs also comes as Libra has continued its development. Many multinational organizations such as the Financial Action Task Force and the G7 have released reports indicating that they see risks in allowing these global stablecoins to persist.

According to a recent report released by the Bank of Canada, if central banks move forward with CBDCs, there are clear risks if that system was anonymous :

“An anonymous token-based central bank digital currency (CBDC) would pose particular security risks. These risks arise from how balances are aggregated and stored, how CBDC is used for transactions, and how various solutions such as e-wallets, crypto exchanges and banks compete to attract users.”

The report elaborated that users will be able to rapidly accumulate capital on anonymous balances much faster than they could with cash, presumably referencing the money laundering risks of such a system.