While Bank of Canada officials believe there’s no need to issue what it calls a “central bank digital currency” (CBDC) at this time, they’re preparing “in case one is needed” in the future, according to Deputy Governor Timothy Lane.
In a speech this February in Montréal, Lane said two scenarios could warrant the creation of a CBDC – if the use of physical cash is reduced or eliminated, or if private cryptocurrencies “make serious inroads” in society. In such scenarios, the Bank of Canada would design its CBDC “to provide the benefits of cash – safe, easy to access, private and a good store of value – but in a digital version that consumers could use to buy things electronically online or in person at a shop,” Lane said.
Technology is changing the way Canadians pay for things, he added.
“Digital payments in the form of debit, credit and prepaid cards are commonplace. We are also seeing mobile payments like Apple Pay and Google Pay, as well as the ability to send money by email. There is even limited use of cryptocurrencies like Bitcoin.”
Differing from cryptocurrencies, CBDCs are digital forms of fiat money, which is established by government regulation, monetary authority or law.
“Digital currencies are designed to provide the same benefits as cash – safety, universal access, resilience, privacy and competition – but in an electronic format that could be used for online transactions or at the point of sale, using a mobile phone or a special card or device,” added Lane.
A CHANGING WORLD
The bank is currently exploring possibilities such as design features, cross-border transactions, integration into the existing financial system and protecting privacy while preventing illicit use.
“As the world changes, the bank will continue to fulfill its mandate to support secure, reliable and efficient payment options that benefit all Canadians,” Lane said, adding digital currencies – “even ones issued by central banks” – won’t replace cash or bank deposits.