Bank of Canada studies Digital Currencies
Bitcoin, blockchain technology and the digital currencies usage has been studied to a great degree by the Bank of Canada. Not so long ago, a group of researchers from central bank produced a report entitled “Canadian Bank Notes and Dominion Notes: Lessons for Digital Currencies” scrutinizing matters in question with regards to private and public cryptocurrencies.
Digital Currency explored by Canadian Central Bank
The Central Bank of Canada has tested its own prototype named Project Jasper since they have been particularly exploring digital currencies. Last summer, Carolyn Wilkins – the Senior Deputy Governor of the bank revealed that a network of banks in Canada and the blockchain consortium R3 were associated in the project.
“Lessons for Digital Currencies” is a current write up that particularize the olden days of public and private fiat currencies issued in Canada with regards to online currency today. A certain way digital currencies will keep up is by regulatory policy, as suggested by the central bank’s researchers.
Government Intervention Needed for Digital Currencies Safety
In digital currencies like bitcoin, certain problems that were coined by researchers were imitation and hacking issues. Bank researchers called out that on top of that, “Digital currencies will not be safe, although government intervention can help”.
The authors included as well that these digital currencies “will not be a uniform currency without government intervention”.
The problems with imitation become apparent with decentralized currencies with no support from the government. As authors expressed:
“There is an additional problem, which is similar to counterfeiting, that arises with decentralized digital currencies that are not issued by a government or do not rely on a trusted third party (like bitcoin). This is the “double spending” problem; the possibility that someone can claim that units of the currency belong to them rather than to the person who thought they owned them.”
No plans of Uniformity for Bitcoins
To add, an entire new world of cybercrime act for example hacking exchanges can be introduced due to decentralized digital currencies. The current Bitfinex hack was utilized by the authors as a source to the reports’ hacking citations.
As Bank of Canada’s researchers presented, “There is another problem that arises with decentralized digital currencies that do not rely on a trusted third party. “Such currencies can suffer fraud and cyber-attacks such as hacking into the system of the issuer or into the wallets that store or provide access to the digital currency. Indeed, such hacking has already occurred”.
Although ideas like bitcoin will not necessarily be forced out, the paper concluded how central banks can make digital currencies themselves. The historical research on the fiat issued in Canada in the 1800s-1900s imparts essential lessons as believed by the authors.
Cryptocurrencies are completely made into a different medium of exchange since currencies such as bitcoins did not do anything to follow the present monetary system.
A report with 33 pages therefore concludes that, “Digital currencies such as bitcoin — represent completely different units of account and, as such, make no attempt at uniformity.”