CanaCoin

Follow on from my last post about pegged crypto tokens. I was thinking about pegged crypto tokens and the Canadian dollar (CDN)

Offhand I can't name any or any prominent CDN tokens. I thought it might be fun or interesting to think about how to define a CDN pegged token. That is, a crypto coin whose value is pegged to the Canadian dollar. I came up with a name anyway, CanaCoin.

So to be pegged, each CanaCoin is backed by one real-world Canadian dollar. I'm thinking some kind of database of guid or whatever, one for each CanCoin. Each CanaCoin may have some kind of digital signature or something establishing who owns it. Technical details are still sketchy. I would say as it stands it would be based on trusted and centralized authority, the CanaCoin issuer. So not anything as sophisticated as trustless or decentralized like Bitcoin.

A user in Canada could send an Interac e-transfer of the amount of CanaCoin to purchase. So would be using Interac to serve as the know your customer (KYC) requirement. CanaCoin authority would still need to find some kind of bank and financial institution with Canadian money to hold the backing money side.

So Interac e-transfer $50 and be issued 50 CanaCoin tokens. On the redemption side redeem 50 CanaCoin and get back Interac e-transfer $50. The CanaCoin authority accepts CanaCoin at $1 CDN.

While the CanaCoin tokens are issued. How to manage the backing money. Something like 50% in plain bank account (immediate access to settle cashouts), 25% maybe in money market (can be accessed in about one week), 25% maybe in max 3 month Canada savings bonds, Canada government or government backed. (can be accessed in max 3 months). So in event of a mass cashout, then make it clear that in an extreme situation some fraction cashouts may take up to three months. The money behind the tokens is safe, it's there. These accounts should generate a bit of interest which could help offset the operating costs of running CanaCoin. Other funding options might include say a modest annual custodial fee on the coins. Would have to think about that. The idea would be a minimal bare bones, part-time operation.

To keep the money safe, could bring in regular proper auditors. They would verify that the coins in the database are backed 1:1 by the money in the accounts. Perhaps verify that the liquidity of 50% immediate is adhered to, and that the money is in what is considered effectively minimum/no risk holdings.

I haven't quite thought through how CanaCoins could be listed on crypto exchanges, or how the digital signatures of ownership might change hands after purchase, without having to redeem the coins at the CanaCoin authority. I mentioned KYC above, along with third party auditing the reserves, which indicates I'm at least aware of the concept of regulatory.

Now CanaCoin doesn't exist at the time of this writing. This is all just conjecture and speculation at this point, a thought exercise.