Bank of Canada eyeing transition to digital currency: annual report

The Bank of Canada will continue to provide Canadians with secure banknotes while “keeping an eye on the transition to digital forms of currency,” according to its 2017 annual report, which was released yesterday.

According to the report, about 2.4 billion Canadian banknotes were in circulation at the end of last year. Polymer notes represented about 86 per cent of the total while older paper money banknotes are “now relatively rare.”

“The Polymer series continued to perform well, lasting a minimum of 3.5 times longer than paper,” reads the report. “The increased durability of polymer, together with its recyclability, results in more-economical and environmentally friendly bank notes. New security features make polymer notes increasingly difficult to counterfeit, which is reflected in Canada’s low counterfeiting rate. At the end of 2017, the counterfeiting rate was 11 parts per million, consistent with levels experienced in the past two years.”

The bank has also continued pursuing its counterfeit-deterrence activities within the retail community as well as in collaboration with the Royal Canadian Mounted Police and Public Safety Canada under the National Counterfeit Enforcement Strategy.

The bank is also part of a research consortium that includes the National Research Council of Canada and other partners in the public and private sectors. A two-year project is under way to develop and test security features for future banknotes.


Currency operations continued to supply secure, high-quality bank notes through rigorous supply-chain management and quality-assurance practices as well as ongoing collaboration with the bank’s financial institution partners.

Through the “Currency Information Management Strategy,” the bank has developed the capability to collect and analyze data from many sources to enhance the quality of banknotes in circulation and identify trends in the use of cash and the movement of bank notes through the distribution system. The strategy has resulted in several improvements:

  • the exchange of data with supply-chain partners and key stakeholders was improved and automated;
  • infrastructure and technology were upgraded to support staff analysis of banknote trends; and
  • pilot studies were conducted to assess the effectiveness of note flow tracking.

The system also supports serial number searches for active investigations by law enforcement agencies.

Last year, the bank also moved forward with plans to modernize its cash-processing centres to ensure to ensure they are adaptable to a changing cash-distribution environment. This will involve enhancing systems and processes related to information technology, control, security, auditing, cash handling, packaging, employee training and occupational health and safety.

The bank led discussions on the banknote distribution system—in collaboration with major financial institutions—to ensure the system’s ongoing efficiency and effectiveness. Regional offices in Vancouver, Calgary, Toronto, Montréal and Halifax have a strong presence across Canada, providing support for the public consultations on banknote design and engaging Canadians in the release of new notes. Regional offices also worked with law enforcement partners, financial institutions and the retail community to educate Canadians about banknote authentication and counterfeit deterrence.

Last year, the bank also advanced its banknote research efforts, including specific work on e-payment technologies, leading-edge bank note security features and cross-border currencies. The bank also began working with the MIT Media Lab on a concept for a central bank digital currency.

Results of the Cost of Payments Study were released early last year and provided insight on the cost of cash and other payment methods in Canada.


Among the Bank of Canada’s many responsibilities is “providing Canadians with banknotes they can use with confidence,” according to the recent report, which added the bank oversees a banknote’s complete life cycle, including design, development, production, distribution, removal and destruction.

“The goal is to ensure that bank notes in circulation continue to meet the needs of Canadians by being secure against counterfeiting, meeting a high standard of quality and being available in sufficient supply.

“The Bank undertakes a broad spectrum of research to inform the strategic direction for its Currency function. Research topics include bank note security and design, the quality and performance of notes in circulation, the use of cash, and the future of bank notes. The Bank also studies the oversight, regulation and issuance of retail electronic payment methods.

“Regular consultations with stakeholders in law enforcement, retail and banking, and the public at large provide valuable information on topics such as how cash is being used, the visual content of future bank notes, and the use and cost of alternative payment systems.

“To deter counterfeiting of Canadian currency, the Bank collaborates with law enforcement agencies and the judiciary and conducts educational activities to increase the routine verification of bank notes by retailers and the public.

“The Bank participates in international working groups and collaborates with research institutes and other central banks to pool knowledge, share opinions and resources, exchange best practices and contribute research in currency-related fields.”


According to the recent report, the Bank of Canada will continue to “explore the potential for a cashless society.”

“Staff will research, analyze and monitor the effect of new payment systems and technologies on the use of bank notes, and will continue research on digital currencies.”

Large-scale industrial tests will be conducted on new banknote technologies that may be applied to future notes.

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