Bank of Canada’s Lane sees a major role for the private sector in the prosperity of central bank digital currencies

A Bank of Canada-sanctioned digital currency would likely come in a basic format and rely on private-sector innovation to add capabilities, the central bank official overseeing research into a potential digital loonie said on Tuesday. at a cryptocurrency conference in the UK.

Bank of Canada Deputy Governor Timothy Lane shared his thoughts on Central Bank Digital Currencies (CBDCs) during a panel discussion at the FT Live Crypto and Digital Asset Summit hosted by the Financial Times. CBDCs are digital currencies issued by a central bank rather than a trading company and have been studied around the world.

“The involvement of central banks may well create something that is essentially digital fiat, but then it would be up to the private sector to innovate and find ways to use it and incorporate it into smart contracts,” he said. said Lane, referring to self-executing contracts that can facilitate direct peer-to-peer transactions on blockchain networks.

“Most of them won’t come from the basic CBDC design,” he added. “They’re going to come from the various other companies who are going to find ways to use it in their dealings.”

While some have suggested borrowing, lending, and real estate transactions as potential uses for smart contracts, Lane said it’s hard to predict what form these innovations might take, and central banks wouldn’t be the best place for them. to develop.

“The central bank would still issue the CBDC and it would still be a liability for the central bank, but all of these uses and how they would be made public…would inevitably involve a high degree of private sector development and collaboration,” he said. declared.

During the event, Lane also highlighted the importance of privacy considerations when developing a digital dollar and maintaining public trust in the central bank.

“An absolutely essential thing should be to ensure that (the CBDC) provides a degree of privacy that is acceptable to the public and that it is not used as a method of surveillance,” Lane said. “And the public can be confident that their transactions will not be used against them in any way.”

With the exception of transactions related to criminal activity. He said the bank would still need a mechanism to track these uses in the digital space.

The Bank of Canada has assessed the possibility of commercializing a CBDC amid the growing popularity of cryptocurrencies. Lane had previously raised concerns that private players could gain a significant foothold in the forex market, leading some industry experts to suggest the Bank might be forced to launch a digital currency to compete. private money.

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