Canada: Bank of Canada Will Only Launch Own CBDC If Cash Fails
The Bank of Canada, which is the nation’s apex bank, has made it clear through its Deputy Governor Timothy Lane, that it will only develop its own central bank digital currency (CBDC) if it sees a compelling reason to do so, according to a report released on February 25, 2020.
No Need for a CBDC at the Moment
At a time when several central banks around the globe, including the People’s Bank of China (PBoC), are putting preparations in top gear to roll out a central bank digital currency (CBDC), Timothy Lane, the Deputy Governor of the Bank of Canada has made it clear the central bank may not develop a digital version of the Canadian dollar anytime soon.
In his speech titled “Money and Payments in the Digital Age,” Governor Lane acknowledged the fact that innovative technologies are rapidly transforming the global financial landscape, with “contactless tap and go” payments, mobile banking and online transactions now gaining ground.
Lane also stated that in a 2017 Bank of Canada Survey that tried to find out how residents pay for goods and services, respondents revealed that they used cash to pay for just one-third of their purchases, a sharp decline compared to more than half just a decade ago.
Libra’s Launch Could Spur BOC to Launch a CBDC
However, despite people’s decreasing appetite for fiat currency and their growing affinity for digital currencies, Lane has made it clear that the Bank of Canada will only create its own digital currency if it sees a compelling need to do so.
“All this being said, the world can change very quickly. The bank of Canada can imagine scenarios in which we would consider issuing a CBDC so we can continue to provide Canadians with trustworthy methods of payment. One scenario would be if we ever reach the point where cash could no longer be used for a sufficiently wide range of transactions.”
Lane further noted that when cash becomes less useful in the rapidly evolving world, payment solutions created by large financial institutions could gain massive adoption, as well as market power; and such a scenario could spur the Bank of Canada o to create a CBDC.
What’s more, Lane says another scenario that may lead the central bank to consider launching its CBDC is when private digital currencies created by big tech firms such as Facebook’s Libra gains prominence.
“This could be one dominant digital currency created by a big tech company — a monopoly that would erode competition and privacy and pose an unacceptable challenge to Canadian monetary sovereignty,” he added.
While Facebook’s global Libra stablecoin project is yet to scale the regulatory hurdles facing it, the Libra Association welcomed its newest member, Shopify on February 21, 2020. However, it remains to be seen whether Libra will go live this year or anytime soon.