2016-06-21 Tue

An experimental digital fiat currency model named CAD-COIN is being studied after a round of discussions between the Bank of Canada, the Canadian Payments Association and the Royal Bank of Canada that was held at the Payments Panorama in Calgary on 16th June.

Officials have stated that a proof of concept is being developed for the wholesale interbank payment system with a distributed ledger to understand the technology better. There are many other challenges which need to be dealt with before introducing a unique system like this one. There are no plans to develop central-bank issued e-money for the common citizens.

The basic idea is to create a national currency in a virtual environment by using a blockchain. Currently traders have to go out of the virtual environment to transfer actual money. The new experiment aims at enabling transfer of actual money on the blockchain.

A trader would have to pledge cash collateral into a special account at the central bank, convert that value into CAD-COIN and deliver it to the participant’s account. The approved members of the network exchange the CAD-COIN. When conversion is required, the participant can redeem the CAD-COIN for cash collateral and the central bank will destroy that amount of CAD-COIN.

As per official reports, the experiment is run by global bank consortium R3CEV and includes participants like - Bank of Montreal, Canadian Imperial Bank of Commerce, RBC, Toronto-Dominion Bank and Scotiabank.

The cryptocurrency community have pondered about the idea of flat currency but many still thought that fiat currencies cannot be issued digitally.

Nine months later, as the experiment takes form, it looks like this vague idea will soon turn into reality.