The Bank of Canada and the Massachusetts Institute of Technology (MIT) today announced an agreement to collaborate on a twelve-month research project on Central Bank Digital Currency (CBDC). The Bank will work with the MIT Media Lab’s Digital Currency Initiative team to explore how advanced technologies could affect the potential design of a CBDC, building on the DCI’s ongoing research into CBDC. This exploration will help inform the Bank of Canada’s research effort into CBDC.

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The project forms part of the Bank’s wider research and development agenda on digital currencies and fintech. It will focus on exploring and experimenting with potential technology approaches to determine how a CBDC could work. No decision has been made on whether to introduce a CBDC in Canada.

The Bank of Canada will provide an update on the findings and outcomes at the end of the project period.

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Ledger Insights | March 16, 2022

Today the Bank of Canada announced it will work with the Massachusetts Institute of Technology (MIT) for its central bank digital currency (CBDC) research. The twelve month project is with the MIT Media Lab Digital Currency Initiative (DCI), the same group that is working with the Federal Reserve Bank of Boston on Project Hamilton.

As with Project Hamilton, the focus is on experimenting with different technical approaches. And the Bank of Canada emphasized that it has not yet made a decision about issuing a CBDC.

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Previously the central bank has cited the launch of a U.S. digital dollar as a possible trigger for Canada to launch its own because of concerns that Canadians might start to use U.S. dollars to a greater extent. President Biden’s digital assets executive order set a concrete timeline for a U.S. CBDC report and legislative agenda, effectively accelerating the United States’ research efforts.

The Bank of Canada has been exploring CBDC for several years. A year ago, it ran a university competition and published the winning three papers.

For its part, MIT’s DCI has a particular approach. For several years the DCI has contributed code to Bitcoin core, and it looks to leverage some of the benefits of cryptocurrencies in its CBDC work. However, in Project Hamilton, the decision was not to use a blockchain for speed benefits, but it uses the same unspent transaction output (UTXO) that Bitcoin uses. MIT also releases all its work as open source.

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