Bank of Canada

Model X Design Challenge

UCalgary professors advise the Bank of Canada on a central bank digital currency design

Interdisciplinary team helping to build the framework of research needed to support centralized digital cash

Central banks around the globe are taking a close look at crypto currencies as they ponder the future of money in an increasingly digital world.   

Crypto currencies – from Bitcoin or Ethereum to Facebook’s plans to launch a digital currency – have attracted attention because of the possibility of direct payment across the world without using intermediaries. Cryptocurrencies, however, are risky as their values fluctuates daily. They are also not bound by banking rules and regulations and so attract illegal and black market activities.

Central banks around the world, including the Bank of Canada, are now studying the technical, practical and business implications of launching their own Central Bank Digital Currency (CBDC), which could offer some of the benefits of crypto currencies with less risk to its users. And while there has been no decision about issuing a centralized Canadian digital currency, the Bank of Canada is getting ready should Canada one day decide it needs one.

Last year, the Bank of Canada invited over 20 top North American universities to participate in a new research competition called Model X, which challenged leading experts to propose a design for a Canadian CBDC. Teams from across North America responded with initial drafts of how a central bank digital currency could potentially work.

In mid-February 2021, the Bank of Canada announced the three teams selected to complete their proposals and share those proposals for public review. The teams are from the University of Calgary, McGill University and University of Toronto/York University, and all received project fees to fund their work.

Five main design goals were outlined by the Bank of Canada: security and anonymity, inclusivity with access even for areas not well-serviced by banks or internet, robustness and resistance to failure, compliance with Canadian laws and obligations and scalablity to potentially handle a large number of transactions daily and payments from small to large.

Many other central banks around the world are exploring the idea of a central bank digital currency. China completed a trial of a digital Yuan in September 2020 and it is expected that other countries will implement a digital currency in the next few years. The requirements of the Bank of Canada are unique with a focus on the, sometimes competing, values of privacy, accessibility and prevention of money-laundering.

“The Bank of Canada had ambitious and detailed design goals that required a team to have both the business acumen and digital privacy and security expertise to understand the implications of a CBDC, know what is and is not possible and why that’s the case,” says Ryan Henry, assistant professor, Department of Computer Science. “And our biggest strength as a UCalgary team is that we have both areas of strength and that’s why I believe we were one of the three universities chosen to tackle this pressing and timely question.”

Meet the team

The interdisciplinary team from UCalgary includes Dr. KJ Choi, PhD and Dr. Alfred Lehar, PhD from the Haskayne School of Business and Dr. Rei Safavi-Naini, PhD, Dr. Ryan Henry, PhD  and Dr. Joel Reardon, PhD from the Faculty of Science.

It is rare to find the range of security and privacy expertise including cryptography, system design and distributed legers and blockchain technologies that is required for this project in one group says Safavi-Naini, who holds an NSERC/Telus Industrial Research Chair in Information Security and the AITF Chair in Information Security. Working together with business colleagues in Calgary, a centre that is known for innovation and leadership in finance, there is the potential to contribute to building something bigger in fintech.

Dr. KJ Choi

Dr. KJ Choi

Kyoung Jin (KJ) Choi is an Associate Professor of Finance at the Haskayne School of Business at the University of Calgary. He joined the faculty in July 2011. He holds a PhD in Economics from Washington University in St. Louis, a PhD in Mathematics from the Korea Advanced Institute of Science and Technology (KAIST), and a BS in Mathematics from Pohang University in Science and Technology (POSTECH). From 2004-2006, he held the position of Research Fellow at the Korea Institute for Advanced Studies (KIAS). Dr. Choi currently teaches FNCE 445 (Futures and Options) & FNCE 559 FinTech at the undergraduate level, FNCE 789 FinTech for the MBA program, and FNCE 799.07 (Topics in Corporate Finance and Asset Pricing) at the graduate level. His research interests include investment, real options, dynamic contracting and fintech. 

Dr. Ryan Henry

Dr. Ryan Henry

Ryan Henry is an Assistant Professor in the Department of Computer Science at the University of Calgary. His research explores the systems challenges of applied cryptography, with an emphasis on using cryptography to build secure systems that preserve the privacy of their users. In addition to designing and analyzing privacy-enhancing systems, he is interested in practical matters like implementing and working toward the deployment of such systems, as well as more theoretical matters like devising number-theoretic attacks against non-standard cryptographic assumptions and developing new models and theories to understand just how efficient "heavy-weight" cryptographic primitives can be. Prior to joining the University of Calgary, Dr. Henry spent four years as faculty at Indiana University Bloomington, where he received the Indiana University Trustees Teaching Award and three competitive research grants from the National Science Foundation.


Dr. Alfred Lehar

Dr. Alfred Lehar

Alfred Lehar is an Associate Professor in Finance at the Haskayne School of Business at the University of Calgary. He has been teaching in the faculty since 2005. He received an undergraduate degree and a PhD from the University of Vienna. Prior to joining the Haskayne School of Business, he held positions at the University of Vienna and the University of British Columbia. Dr. Lehar teaches introductory finance for the MBA program and a class on Corporate Finance for PhD students. His areas of research interest include fintech, bank regulation, financial stability, and corporate finance. Dr. Lehar is currently researching mining fees and price differentials in Bitcoin markets, decentralized exchanges, and under what conditions renegotiations can facilitate a private sector workout of a financial crisis. He also works on how information produced by financial markets can be optimally used in bank regulation. In his previous research he developed several methods on how to measure the probability of a financial crisis, analyzed conflicts of interest for financial analysts, and looked at the empirical fit of alternative option pricing models.

Dr. Joel Reardon

Dr. Joel Reardon

Joel Reardon is an Assistant Professor in the Department of Computer Science at the University of Calgary. His research focuses on cybersecurity, an area in which he holds extensive domain knowledge, particularly as it relates to smartphones. In 2018, he co-founded AppCensus Inc., incorporated in California. This company provides privacy analytics as a service and is directly spun out of Dr. Reardon’s own research along with collaborators.  AppCensus’ AppSearch service analyzes free publicly-available Android apps, and reports the private and personally identifying information that different apps access and share with other parties over the Internet. The company has partnered with Consumer Reports and the International Digital Accountability Council, and has worked for the US state and federal regulators and the Australian Competition & Consumer Council.  Most recently, Dr. Reardon received the 2020 Casper Bowden Award for outstanding research in privacy enhancing technologies. He is also a sought after source for the media with respect to privacy and cybersecurity issues.

Rei Safavi-Naini

Dr. Reihaneh Safavi-Naini

Reihaneh Safavi-Naini is a Professor of Computer Science at the University of Calgary and holds the NSERC/Telus Industrial Research Chair and Alberta Innovates Strategic Chair in Information Security. She is the co-founder of the Institute for Security, Privacy and Information Assurance at the University of Calgary and served as its Director until December 2018. She is currently leading the Information Security and Privacy Lab in the Department of Computer Science. Dr. Safavi-Naini's current research interests are cryptography and its application to information security, information theoretic and quantum-safe cryptography, secure distributed and decentralized systems, and smart contracts and their applications.

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