Central Bank Digital Loonie: Canadian Cash for a New Global Economy

76 Pages Posted: 18 Feb 2021 Last revised: 10 Mar 2021

See all articles by Andreas Veneris

Andreas Veneris

University of Toronto - Department of Electrical and Computer Engineering, and Department of Computer Science

Andreas Park

University of Toronto - Finance Area

Fan Long

University of Toronto - Department of Computer Science

Poonam Puri

York University - Osgoode Law School

Date Written: February 11, 2021

Abstract

Global economic digitization continues to advance at exponential speed. This development is in sharp contrast to the financial sector and payment systems that still operate on legacy infrastructure that lacks the flexibility to serve those technology needs. Further, the emergence of Decentralized Finance demonstrates the capacity to disrupt the financial sector, impact national sovereignty, and affect established monetary transmission channels. Hence, it is no surprise that nation-states and tech-firms alike are now building new digital infrastructures that circumvent the legacy practices. Central banks, in particular, are racing to explore the issuance of Central Bank-issued Digital Currencies (CBDCs) in an attempt to rediscover the very essence and use of fiat cash.

In the past decade, the Bank of Canada (BoC) has emerged as an international thought leader on CBDCs. In early 2020, the BoC issued a contingency plan for the potential introduction of a CBDC and later that spring ran a global competition among universities to sample arm length’s designs. Being a finalist in this competition, this manuscript presents a design proposal for a Central Bank Digital Loonie (CBDL) based on careful academic research of the possible technological, legal, and economic components of such an unprecedented and historic expedition. We propose a two-phased approach. In the first phase, the BoC introduces a centralized platform as a public-good infrastructure that establishes digital cash and ensures global/domestic interoperability. In this phase, e-KYC-based authentication leverages existing private/public sector solutions but also safeguards users' privacy/data against third-party commercial interests while complying with AML/CFT. In the second phase, the BoC will expand the platform to an enterprise-level permissioned blockchain. This shared resource will transform CBDLs into "programmable e-money" within a “social operating system” that will enable Canadians to operate, innovate, compete, and thrive in this new global digital economy.

Keywords: CBDC, central-bank issued digital currency, blockchain, AML/CFT

JEL Classification: G20, E42, E58, E52

Suggested Citation

Veneris, Andreas and Park, Andreas and Long, Fan and Puri, Poonam, Central Bank Digital Loonie: Canadian Cash for a New Global Economy (February 11, 2021). Osgoode Legal Studies Research Paper, Available at SSRN: https://ssrn.com/abstract=3770024 or http://dx.doi.org/10.2139/ssrn.3770024

Andreas Veneris

University of Toronto - Department of Electrical and Computer Engineering, and Department of Computer Science ( email )

10 King's College Rd,
Toronto, Ontario M5S 3G4
Canada

HOME PAGE: http://https://www.eecg.utoronto.ca/~veneris/AndreasVeneris.htm

Andreas Park (Contact Author)

University of Toronto - Finance Area ( email )

Toronto, Ontario M5S 3E6
Canada

Fan Long

University of Toronto - Department of Computer Science ( email )

Sandford Fleming Building
King’s College Road, Room 3302
Toronto, Ontario M5S 3G4
Canada

Poonam Puri

York University - Osgoode Law School ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

HOME PAGE: http://www.osgoode.yorku.ca/faculty/Puri_Poonam.html

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