On November 29, the Bank of Canada published the findings of its public consultation on central bank digital currencies.
The report found that, on the whole, Canadians are against a Canadian Dollar CBDC, citing a preference for cash and the potential erosion of privacy, accessibility, and financial stability risk as concerns.
The Bank of Canada has also expressed skepticism about the uptake of a CBDC. Discussions with civil society and focus groups have revealed demands that would be difficult to fulfill, such as that CBDCs be accessible without identity documents.
Canadian retail banks also expressed concerns that a CBDC would siphon deposits from their accounts. They also expressed a desire to be part of distributing any potential digital CAD.
Ultimately, all parties agree that the ultimate decision rests with parliament. Ottawa has stated that monetary sovereignty is its number one concern but that a CBDC would be desirable should the United States launch one with significant uptake.
Fears about privacy erosion and potential abuse expressed globally
The report by the Bank of Canada sounds familiar to anyone tracking the development of CBDCs around the world. Time and time again, citizens express the same concerns about privacy and potential government abuse should they gain so much control.
Actions like those taken by Canadian Prime Minister Justin Trudeau during the trucker protest in 2022 will have done nothing to soothe such fears. Trudeau’s government froze hundreds of bank accounts and even seized BTC donations during a showdown framed by many as a battle between civil liberties and an increasingly authoritarian government.
Yet, CBDCs do not have to run on systems controlled by governments. The world’s first electronic cash system was purpose-built for such use cases, and building CBDCs on Bitcoin solves many of the issues expressed by all concerned parties.
A Canadian dollar on BSV would strike the right balance
The BSV blockchain is the original Bitcoin protocol restored and implemented correctly. As a cash system, transactions are peer-to-peer and do not require a trusted third party.
The BSV blockchain is also infinitely scalable and is already capable of hundreds of thousands of transactions per second for fees of fractions of a cent. It’s also possible to mint tokens on BSV like CBDCs, allowing digital dollars and other currencies to run on Bitcoin.
Issuing and running a CBDC on Bitcoin would go a long way to addressing the concerns expressed by citizens worldwide. Governments would not control the underlying system, and while freezing funds and recovering digital assets is possible, it requires court orders to do so. Thus, government power would be checked while still being applicable where evidence of potential criminality can be shown.
Likewise, being a cash system with tiny fees, users could have as many wallets as they wish, storing just enough of a given CBDC for small, casual transactions. While AML/KYC laws still apply at certain amounts, smaller transactions operate just like cash, so no identity would be required.
As for the concerns expressed by civil society groups about accessibility, particularly with regard to identity, this can also be solved on Bitcoin. Blockchain-based identity systems can be built on Bitcoin, not only increasing accessibility for many but also substantially reducing bureaucracy and inefficiency.
While there’s likely no perfect solution that pleases everyone fully, CBDCs on the original Bitcoin blockchain make a lot of sense and strike the right balance between various concerns. Since CBDCs seem inevitable despite public pushback, it’s important for all to start exploring options to mitigate issues while making CBDCs as efficient, cost-effective, and private as possible.
To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.
Watch: CBDCs are more than just digital money
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