Canada’s Central Bank Researching Digital Currency for Cash Replacement

The Canadian apex bank, The Bank of Canada, is considering the launch of its digital currency, to help it mitigate the threat of cryptocurrencies on financial systems. 

According to an exclusive presentation made for the bank’s governor and board of directors as seen and reported by The Logic, the presentation prepared by Stephen Murchison, stressed the need for the nation to create a digital currency, as the widespread adoption of cryptocurrencies could spell doom for the nation’s financial system.   

“Cryptocurrencies may become a direct threat to our ability to implement monetary policy and lender of last resort (LOLR) role,” part of the report reads.

The presentation dubbed “Central Bank Money: The Next Generation” was part of last year’s study conducted by the bank to identify the pros and cons of issuing a digital currency. 

As per the presentation, the proposed digital currency is tipped to initially coexist with the nation’s fiat currencies, with plans to subsequently replace these fiat currencies in the future. 

Privacy in Canada? Not likely!

Notably, the presentation highlighted that the launch of a digital currency could help collect citizens’ personal information, which could prove useful to the police and tax authorities, as well as revealing how people spend their money. 

The presentation went on to reveal other benefits associated with launching a digital currency, including convenience, security, and making the country’s payment system more robust. 

However, the research identified that the launch of a digital currency could present a risk of low-cost funding for bank deposits.

Since the research on whether to issue a digital currency in the country is still ongoing, the bank is yet to decide whether it will launch a digital currency. 

However, the presentation stated that the time to launch a digital currency is now as fiat currencies are gradually becoming obsolete, which could see them rejected by merchants and banks in the future because they would be costly to possess.   

This is not the first time that a country’s central bank will be considering a project similar to this one.

In August, Coinfomania reported that Rwanda Central Bank had commenced research to develop and issue a central bank-issued digital currency (CBDC) to boost its economic growth.