The role of public money

The debate about private versus public money often comes down to access

The Bank of Canada recently released a paper announcing that, after years of research, it has decided to pause the development of a central bank digital currency (CBDC). The new administration in the United States also recently passed an executive order prohibiting the development of a CBDC.

The primary reasons? The existing financial ecosystem already provides sufficient digital payment alternatives, and public feedback has consistently raised concerns about privacy.

This decision reframes the debate around the role of public versus private digital money. Public money is issued and backed by a government, ensuring legal status and broad accessibility.

We talk a lot about digital transformation and digital technologies, but it's important to note that for a lot of reasons related to access, ease of use, and even privacy, cash is still king.

Private money, on the other hand, is created by non-governmental entities. This distinction can be a little bit confusing, because new technologies that compete with government-backed cash, such as stablecoins or major cryptocurrencies, like Bitcoin and Ethereum are actually more publicly accessible than how we define public money – but the idea of ultimate control is important here.

If non-government based systems can efficiently provide more efficient financial services, should governments still issue money in digital form? Or does maintaining a public digital currency safeguard certain essential functions that private alternatives cannot?

The Bank of Canada’s choice to step back stands in contrast to global trends. According to the Atlantic Council, 134 countries are actively researching or developing CBDCs. Many governments see them as an inevitable part of the future financial system, with varying motivations ranging from financial inclusion to greater monetary control.

Here’s why this matters:

Public money ensures universal access: Unlike private digital currencies, which are market-based or performance-driven, a CBDC could function as a public utility, ensuring that all citizens — including those underserved by banks— have access to a stable, government-backed digital currency.

Privacy and surveillance concerns remain unresolved: A core reason the Bank of Canada paused its CBDC plans is public concern over financial surveillance. In contrast, other governments pushing CBDC adoption see it as a tool for enhanced oversight, with implications for privacy, civil liberties, and financial autonomy.

Interoperability or dominance? The future of digital money isn’t just about choosing between public and private options but about whether different models can coexist. Can we create interoperable networks where public and private digital currencies function alongside each other, each fulfilling distinct roles? Or will a dominant model emerge, echoing historical shifts in monetary power?

Interestingly, this is where Open Money comes in. Open-source, auditable, permissionless money operates as a public good that's not issued by any government — making it distinct from both traditional public and private money.

Open Money is resistant to censorship and functions outside state control, but its value is market-driven rather than state-guaranteed.

While some governments forge ahead with CBDCs, others may find that private alternatives, decentralized networks, or hybrid models provide a more balanced path forward. The key challenge remains: how do we ensure innovation while safeguarding privacy, accessibility, and financial stability?

Recent Open Money project posts