The Bank of Canada said it still thinks a digital version of the dollar is unnecessary, but it wants to know what Canadians think about the possibility anyway.
Canada’s central bank stepped up its years-long investigation of cryptocurrency on May 8, initiating a public consultation on the subject of a central bank digital currency. Policymakers said they will take submissions until June 19.
“As Canada’s central bank, we want to make sure everyone can always take part in our country’s economy,” senior deputy governor Carolyn Rogers said in a press release on May 8. “That means being ready for whatever the future holds.”
This is part of the central bank’s ongoing push to explore the utility of a purely digital version of fiat currency as the world shifts to online services. Most central banks are conducting similar research, and some state-sanctioned digital currencies are already in circulation.
Rogers was clear that the Bank of Canada’s position remains that cash isn’t going anywhere, that a digital dollar isn’t needed at this time and that the central bank is still planning on making bank notes available to anyone who wants them.
The federal government would ultimately decide whether to issue the dollar in electronic form, but the Bank of Canada has taken it upon itself to lay the groundwork for making that decision, if the need ever arises.
Private cryptocurrencies and other countries’ digital currencies could gain the upper hand if Canadians were to begin using them at scale, which would pose risks to the country’s financial stability if it undermines the role of an official currency.
The Bank of Canada’s research on digital currencies extends as far back as 2013 and became a greater area of focus in recent years as cryptocurrency’s popularity exploded. Former deputy governor Timothy Lane, who had been on the digital currency file up until his retirement in September 2022, made the case in October 2020 that the COVID-19 pandemic accelerated the need for policymakers to consider developing a digital currency as more Canadians flocked to online services.
During a panel discussion in April 2022, Lane said he could see the private sector playing a major role in building on the digital currency framework with more sophisticated innovations and capabilities.
Part of the push towards researching a Canadian digital currency is to avoid the risk of the private sector taking control over cryptocurrency innovations. Lane raised these concerns during a speech before the Institute for Data Valorization in Montreal in February 2021, when he warned of the possibility of a tech company becoming the “gatekeeper of the entire economy.”
BoC’s Lane sees the private sector making digital currencies flourish
Crypto has potential but it won’t usurp the loonie: Tiff Macklem
Bank of Canada governor Tiff Macklem echoed these same concerns last year when he said he saw the potential for private-sector cryptocurrencies, but that the Canadian dollar would remain central to the country’s current financial system.
The Bank of Canada said it will issue a report later this year summarizing what it learned from the public consultations.