A press release published by the Bank of Canada announced that the authority is looking into the possibility of issuing a digital form of the Canadian dollar, also known as a central bank digital currency (CBDC). As per the released document, the country is planning to provide avenues for every citizen to participate in the economy, but it categorically demarcated that it is a periphery of Parliament and the government of Canada to draft legislation.
According to the release the bank highlighted major reasons for the adoption these include financial inclusion and protection of the economy and financial system. The document mentioned that it is possible in the future, cryptocurrencies or CBDCs issued by foreign countries could be widely used in Canada and highlighted the threat to the central role of the Canadian dollar in our economy and affect the stability of our financial system.
The Digital Canadian dollar would be a digital form of cash in the wallet. Like cash, it could buy the things an individual needs. But the advantage is that it could also be used for online purchases and to transfer money between family and friends. And businesses could use it to pay each other. This new form of money would be issued by the Bank of Canada and provide benefits similar to cash: it would be safe, accessible to everyone and private. The bank highlighted that a digital Canadian dollar would not replace cash, the bank will continue to supply bank notes as long as Canadians want to use them.
A digital dollar would complement cash, not replace it. Bank notes will continue to be available to Canadians even if we introduce a digital currency. So people who prefer cash can continue to use it.
As per the bank, a digital dollar would complement cash, not replace it. Bank notes will continue to be available to Canadians even if we introduce a digital currency. So people who prefer cash can continue to use it. A digital Canadian dollar would not be a cryptocurrency, also known as a crypto asset or private digital currency. The value of cryptocurrencies like Bitcoin goes up and down quickly and often relative to the Canadian dollar. These currencies can have expensive transaction fees, take a long time to process and allow for limited recourse if things go wrong. In contrast, a digital Canadian dollar’s value would not change because it’s simply another form of the current Canadian dollar, and it would be backed by the central bank in the same manner as cash.
The consultation’s questionnaire asks Canadians a wide range of questions including the payment methods they’ve used in the last month, how often they would potentially use a Canadian CBDC and what design features they wish to see. It also specifically asks if the survey taker uses or holds cryptocurrencies and features a range of demographic questions about gender, age, education and income. The BoC said it will publish a report summarizing the consultation “later this year.”
It is important to note that many countries across the globe are planning to implement CBDC. For example, India’s Reserve Bank of India (RBI) issued a concept note on Central Bank Digital Currency (CBDC) in October 2022. Other countries such as China and Australia are also planning for similar adoption. Interestingly, it can be a potential consequence of enhancing trade relations. It is important to note here that comprehensive and collaborative discussion and deliberation among citizens and governments are crucial for the adoption of CBDC.