Bank of Canada Launches Consultations on Central Bank Digital Currency
The Bank of Canada (BoC) has announced that it is exploring the possibility of issuing a Central Bank Digital Currency (CBDC), and is seeking consultation from the public on its design.
“As Canada’s central bank, we want to make sure everyone can always take part in our country’s economy. That means being ready for whatever the future holds,” Senior Deputy Governor Carolyn Rogers said in a release on May 8.
The bank is holding consultations to ask Canadians for their opinions on topics such as how they are likely to use digital dollars, what security features are most important, and what concerns they have about accessibility and privacy.
“We want to hear from Canadians about what they value most in the design of a digital dollar. This will help us make design choices and ensure that it is secure, reliable, and meets the needs of Canadians,” Rogers said.
The BoC said, while it does not currently see the need for a CBDC, Canada may require one in the future, “so we need to get ready.” It said, ultimately, the decision on whether to create a digital dollar will be determined by the government of Canada and Parliament.
According to the BoC, a Canadian digital dollar would not be a cryptocurrency like Bitcoin, which has a value that fluctuates relative to the dollar, has high transaction fees, and takes a long time to process. Instead, the value of the CBDC would not change, “because it’s simply another form of the current Canadian dollar, backed by the central bank in the same manner as cash.”
“Our goal is to design a digital Canadian dollar that would be fast and low-cost to use, just like cash is now,” the BOC said.
Civil Liberties Concerns
While running for leadership of the Conservative Party in April 2022, Pierre Poilievre promised to axe any decision by the BoC to create a CBDC, arguing it should be left to financial markets.
Poilievre also raised concerns about the BoC being able to surveil how Canadians spend their money and “potentially abuse” citizens’ civil liberties, citing as an example the freezing of the accounts of Freedom Convoy protesters after the feds invoked Emergencies Act.
The BoC said if a CBDC is issued in the future, it will continue providing bank notes “for those who want them,” as it has for over 85 years.
“However, there may come a time when bank notes are not widely used in day-to-day transactions, which could risk excluding many Canadians from taking part in the economy,” it said.
It is also possible in the future, according to the BoC, that CBDCs or cryptocurrencies issued by other countries could become widespread, adding this could threaten the role of the Canadian dollar and pose a risk to the stability of Canada’s financial system.
Over 100 countries, representing over 95 percent of global GDP, are currently exploring some form of a CBDC. As of May 2023, 40 countries are researching the latter, 32 are developing them, 18 have launched pilot projects, and 11 have implemented them.
