Opportunities for Digital Assets in a Fractured World

The US dollar’s dominance in international trade and finance is facing threats from increasingly fractured global economic and financial systems. The foundation of the US dollar, built on the American economy’s strength in world trade, the liquidity of its financial markets and accessibility of US dollar assets, is beginning to crack.

But, Timothy Lane writes in this paper, options for digital assets that could replace the US dollar, such as crypto-assets and stablecoins, have their own challenges. As a result, many countries are exploring central bank digital currencies (CBDCs) as an alternative to maintain their monetary sovereignty.

In this paper, Andreas Veneris examines the evolving landscape of digital privacy, decentralization and digital assets, and asks: Where does Canada fit in this global picture?

With most of the world’s largest economies actively exploring CBDCs, Veneris makes the case that “Canada should not only restart work on the digital Loonie but should also develop federal regulatory frameworks that prioritize privacy protection, compliance and data security for its digital currency and other Web 3.0 tools and assets.”

“The recently elected Carney government faces a fraught global security environment, and an unprecedented multiparty consensus to spend more on defence. One notable defence spending proposal in the Liberal platform was the launch of a Bureau of Research, Engineering and Advanced Leadership in Science (BOREALIS).”

In this article first published by The Hill Times, Michael P. A. Murphy, Tracey Forrest and Paul Samson write that if done right, BOREALIS “could ensure that Canada keeps pace in the fast-moving world of disruptive technologies” but that Canada will have to “wrestle with the core challenge of managing ‘dual-use’ technologies” for that investment to have the most meaningful impact.

The Digital Policy Hub at CIGI is a collaborative space for emerging scholars and innovative thinkers from the social, natural and applied sciences. Here are the most recent working papers published by Hub fellows.

Ashley Ferreira: “Are Large Language Models Actually Getting Safer?”

Amelia Hui: “US-China Tech Rivalry: Convergent Technologies in Autonomous Weapons Systems”

Follow the links on the Hub webpage to learn more about the Hub scholars and their work.

Colin Chia reflects in this opinion on the US Senate’s recent passing of the GENIUS Act, “a first-of-its-kind stablecoin bill that hands the crypto industry its first major legislative win.”

By maintaining a stable value relative to an official currency, stablecoins promise to be less volatile than other forms of crypto-assets, but Chia cautions that this link “represents particular risks to the economy and should be the focus of attention as part of a broader regulatory system to achieve larger financial stability objectives. With the emergence of marked cross-national differences in regulatory approaches to crypto-assets, policy makers also need to think about how to prevent and contain possible crisis contagion across jurisdictions.”

In this opinion, Tracey Black says “Canada is set to take a major step forward in payments modernization with the launch of the Real-Time Rail (RTR) in Q3 2026,” which “is expected to become the system of choice to support open banking-enabled payment services, when introduced. However, since the COVID-19 pandemic, payment innovation has accelerated significantly, and the RTR will face new entrants that were not envisioned when the system was designed.”

Canada should ready itself for a future where the RTR, CBDCs and stablecoins coexist, Black argues, and “as such, a coordinated national payments strategy is needed — one that defines where and how these real-time payment options can operate in a complementary manner to safely foster innovation, maintain confidence in the financial system and allow Canada to compete globally.”