Bank of Canada to Lay the Groundwork For Its Own Digital Currency
- Bank of Canada plans to issue a backup plan for launching its own digital currency if it becomes necessary
- The bank has no good reason to launch the CBDC right now, however, it wants to be prepared
- The bank will launch the digital currency if the use of cash diminishes in the future or if private cryptocurrencies make serious progress
Canada’s central bank wants to pave the way for its own digital currency as a part of a contingency plan, said the deputy of the Bank of Canada.
The bank said it doesn’t see a strong case to roll out the digital currency right now, however, it plans to lay the groundwork to issue a cash-like digital currency if it becomes necessary.
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“We need to move forward to work out what a potential CBDC (central bank digital currency) might look like and how it could be managed if the decision were ever taken to issue one,” said Timothy Lane, Deputy Governor of the Bank of Canada.
The Bank of Canada said it sees two possible scenarios where it could become necessary to roll out its own digital currency. It will launch the CBDC in case the use of physical cash gets reduced in the future, or if private digital currencies were to make significant breakthroughs.
“In both scenarios, there would be an argument for the Bank of Canada to step in,” Lane said. “The Bank would do this as a trusted public institution, creating an official digital currency that is designed with the interest of the public as its top priority, with no commercial motive.”
The bank has been analyzing digital currencies’ impact on technology and economy over the past six years, snf has also followed the growth of “stablecoins” that maintain their value, as the name suggests.
There are around 150 stablecoins in the world that have an improved outlook for mainstream adoption, including Facebook’s Libra which is expected to be launched this year, said Lane, and this is what could make it very difficult for the bank to reach its inflation targets.
“It would become increasingly difficult to control the stability of the purchasing power of the Canadian dollar,” said Lane in a Q&A session.
Currently, the central bank can design, launch, and distribute the money Canadians use nowadays, but it has no legislative power to roll out a digital currency. However, the talks with the Finance Department about possible legislative changes are expected to begin soon.