Canada’s Central Bank Considers Launching a Digital Currency to Combat the “Direct Threat” of Cryptos - Blockchain.News

Canada’s Central Bank Considers Launching a Digital Currency to Combat the “Direct Threat” of Cryptos

Sarah Tran Oct 17, 2019 03:00

Canada’s Central Bank, the Bank of Canada, is considering launching a digital currency that would enable the collection of how Canadians spend their money.

Canada’s Central Bank Considers Launching a Digital Currency to Combat the “Direct Threat” of Cryptos

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Canada’s Central Bank, the Bank of Canada, is considering launching a digital currency that would enable the collection of data on how Canadians spend their money. 

 

The two-year research findings 

 

The Bank of Canada prepared a presentation for Stephen Poloz, the Governor, and the bank’s board of directors. During the internal presentation, members of the bank provided detailed public insight into the bank’s plans on a proprietary digital currency.  

 

The presentation, “Central Bank Money: The Next Generation,” was prepared by Stephen Murchison, Poloz’s advisor, and was assigned to lead the bank’s digital currency research. The two-year research project on digital money was to determine whether the bank should issue its own digital currency.  

 

Presented by Murchison, the research concluded that launching a central bank-issued digital currency would offer “all the benefits” of a central bank-backed asset, and also “all the convenience and security of wireless, electronic payments.” Listing over a dozen benefits, including “an additional payment method could make the payment system more robust, the only limitation is that a digital currency “also presents a risk to stable, low-cost funding for (banks) (deposits).” 

 

The digital currency 

 

“We need to innovate to stay in the game,” the presentation states, while also suggesting that a digital currency could come with the option to pay interest on balances. The ability to collect more information on how Canadians spend money will also be made more convenient, while the presentation also highlights that “personal details not shared with the payee, but could be shared with police or tax authorities.” 

 

The two deployment options for the digital currency are either token-based or account-based. As banknotes are becoming obsolete as a means of payment, while creating inefficiencies for the banking system, the presentation reads, “the time may come that merchants/banks find it too costly to accept banknotes.” 

 

Concerns over the implications of digital money 

 

The presentation further added that if banknotes become too costly for banks, “ordinary Canadians would lose access to central bank money.” However, the rise of cryptocurrencies will threaten the bank’s ability to carry out monetary policies and act as a lender of last resort.  

 

Global regulators and central bankers have been concerned over the implications of digital money, since the announcement of Libra and news of China launching its own digital currency. Gathered in Washington D.C., global regulators and central bankers, including representatives from Canada, attended the annual joint World Bank/ International Monetary Fund meetings to discuss the future of finance.  

 

 

Image via Shutterstock

 

 

 

 

 

 

 

 

Image source: Shutterstock