While the Bank of Canada has accelerated its plans for a central bank digital currency (CBDC), something its officials call a “digital loonie,” one of the bank’s top brass says it’s not a “foregone conclusion.”
On Feb. 10, Deputy Governor Timothy Lane spoke at the Institut de valorisation des données, a Québec-based digital-intelligence institute, about the digital economy, payment innovations and cash usage trends in the wake of COVID-19.
“For several years, the Bank of Canada has been analyzing what circumstances might lead Canada to decide to issue a digital currency,” said Lane. “The pandemic may bring us to a decision point sooner than we had anticipated.”
Last February, Lane said the central bank had no urgent plans to issue a digital currency; however, he added that could change if cash use dropped significantly or privately backed cryptocurrencies like Bitcoin or Facebook’s Diem became widely used. In this month’s speech – despite a decline in cash usage during the pandemic – he said the bank still sees no urgent need for a CBDC, which he called a “contingency plan.”
“A year later, our view remains unchanged,” he said. “A digital currency is by no means a foregone conclusion. This said, the world has been changing even faster than we expected; in fact, just two weeks after I spoke, the first lockdown was imposed, which accelerated the evolution of the digital economy as I’ve just been discussing.”
In step, the bank’s work “to prepare for the day when Canada might want to launch a digital loonie backed by the Bank of Canada has also accelerated.”
Lane also referenced the lack of security with cryptocurrencies like Bitcoin, which does “not have a plausible claim to become the money of the future.”
“They are deeply flawed as methods of payment – except for illicit transactions like money laundering, where anonymity trumps all other features – because they rely on costly verification methods and their purchasing power is wildly unstable.”