Bank of Canada Explores Privacy-Focused Digital Dollar with MIT’s OpenCBDC Model

The Bank of Canada is advancing its research into a potential digital Canadian dollar, unveiling a new technical blueprint focused on privacy, decentralization, and everyday use. In partnership with MIT’s Digital Currency Initiative, the central bank tested the OpenCBDC 2PC model, a two-phase commit system designed to mimic the anonymity and simplicity of physical cash.

The proposed model allows Canadians to hold digital funds in self-custodied wallets, enabling peer-to-peer transactions without revealing personal identities to banks or payment processors. The system separates user identity from transaction data and could integrate advanced cryptographic tools like zero-knowledge proofs to further shield transaction amounts, offering privacy potentially stronger than current electronic payment methods.

Unlike traditional bank accounts, the model adopts a Bitcoin-like structure using unspent transaction outputs (UTXOs) to handle transfers. Transactions settle in two steps—updating a core ledger and moving funds between wallets—supporting real-time settlement and reducing the risk of institutional surveillance.

However, the report highlights integration challenges, particularly with point-of-sale systems that would need significant upgrades to support digital cash. The system is scalable but requires further refinement to maintain performance during audits and recovery phases.

While the Bank of Canada previously shifted away from retail CBDC plans, this research lays a robust technical foundation should demand grow. The central bank emphasized the study is exploratory, not a commitment to launch a CBDC. Still, political winds may shift—Canada’s new Prime Minister Mark Carney previously expressed support for CBDCs, calling them “the most likely future of money” in his 2021 book.

As global interest in central bank digital currencies intensifies, the Bank of Canada’s privacy-first approach positions it at the forefront of secure and citizen-focused CBDC innovation.