Bank of Canada Not to Offer CBDC Unless Competitors Arises

In a speech titled “Money and Payments in the Digital Age” made by Timothy Lane, the Deputy Governor of the Bank of Canada, he has said that the bank does not have any plans at the moment to issue any form of digital currency. He shared a detailed opinion from the bank’s perspective regarding the current developing trend for digital currency. It seems that the bank sees cash as a perfectly fine and working instrument for financial transactions.

Of course, that does not mean that the bank is not interested in the digital currency at all. In fact, the Bank of Canada has been one of the most actively engaged students of the whole Central Bank Distributed Currency (CBDC) concept. It is also one of the few banks to run a proper pilot project using the R3’s Corda, a tech-based distributed ledger solution. It went beyond just being a project and also saw a real-world application where the bank did live testing of the project by putting it to use in a cross-border settlement that it had to undergo with the Monetary Authority of Singapore.

However, after the trial was complete, it seemed that the technology failed to impress the authority properly. Mr Timothy was quoted as saying; “We have concluded that there is not a compelling case to issue a CBDC at this time. Canadians will continue to be well-served by the existing payment ecosystem, provided it is modernized and remains fit for purpose.”

Of course, this statement did not mean that they were planning to put all their cards behind cash either. Lane does realize the power of cryptocurrencies and even went on to call them “a monopoly that would erode competition and privacy and pose an unacceptable challenge to Canadian monetary sovereignty.”

As far as that threat is concerned, there aren’t any real “active” competitors in the market at the moment. However, there is one name that does bring a concern to the traditional cash-based solution and that is Project Libra.

Libra is the Stablecoin that Facebook created a few years back and currently, it is one of the biggest forces moving the cryptocurrency ecosystem forward. It is still under development, but the efforts are no longer being made by Facebook alone. While it is still the lead party, the effort is now being made by a whole association of major organizations.

There has been a lot of harsh reaction about what role Libra will end up playing in the future. Up until last week, the European Union was very much unsure about how it would be able to deal with Libra. A lack of information regarding the cryptocurrency means they are unable to take any established approach in terms of regulation.

Timothy Lane also commented on Libra by saying, “It’s tough to predict if Libra will ever live up to its promises or even come into existence. But it is a good example of a transformative technology that affects how the bank needs to respond to the future of money.” While his comment may seem slightly more dismissive, you can tell that the expectation is still there for the role that Libra will eventually play as a digital currency.

The Bank of Canada is still pursuing the digital currency market and is exploring the field with several partners. Major names include the central banks of the U.K, Japan, Sweden, the EU, Switzerland, and the Bank of International Settlements as well. Lane also said that the Bank of Canada will be taking consultations from the local governing bodies in its territories and gauge their interest in deploying a CBDC.

In concluding his speech, Timothy Lane did entertain the ultimate possibility of a digital currency future in Canada and shared his vision on how the bank would help steer such a scenario. He pointed out two possible scenarios, one being a complete elimination of traditional cash, and the second being a huge growth in the use of private cryptocurrencies.

According to Lane, if either of those situations were to happen, the best way for modern-day society to tackle it would be to make sure that the digital currency that they use is one:

• “that is designed, issued and distributed by an organization that is guided by the interest of the public good, rather than profit;”
• “that is safe, resilient, universally accessible and private—just like cash; and”
• “that is backed by a central bank’s balance sheet and its reputation for preserving the value of our money.”

It is clear that the bank is ready to take the leap, but only if CBDC becomes a popular option, one that is highly demanded by the public. He said, “Our intent would not be to issue a CBDC to replace banknotes or chartered bank deposits. The public still wants both of these products, and we will support them.”

The bank is also working on introducing a new C$5 note as they want to continue to serve those who prefer the traditional cash solution a well.

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