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The Bank of Canada is looking to gauge public interest in a possible digital dollar, while maintaining that an electronic version of the currency is not yet necessary.
The central bank has been exploring the idea for several years in response to the decline in physical cash transactions and the growth in electronic payment systems and cryptocurrencies.
On Monday, it launched its first public consultation on the issue. The online survey, which runs until June 19, asks Canadians how they might use a digital loonie, and what security features they would want it to have.
The decision on whether to launch a central bank digital currency (CBDC) rests with the federal government, not the Bank of Canada. However, the central bank has been laying the groundwork in case Ottawa greenlights the idea.
“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 news release.
CBDCs have become a major topic of research at central banks around the world. Monetary policy makers are wary that a decline in physical cash use could undermine their position at the centre of their country’s payment system. This concern was accelerated by Facebook’s announcement in 2019 that it would launch its own digital currency. The plan has since been abandoned.
“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,” the Bank of Canada said in the news release.
“It’s also possible that private cryptocurrencies or central bank digital currencies issued by other countries could become widely used in Canada in the future. This could compromise the role of an official, centrally issued currency — the Canadian dollar — in our economy and pose a risk to the stability of our financial system.”
We’re not there yet, the Bank of Canada said on Monday, reiterating its position that “at this time, a digital Canadian dollar is not needed.” Bank officials have said that there would need to be a sharper decline in cash usage or a much larger uptake of cryptocurrencies before a CBDC would be the best option.
The bank added on Monday that it would continue to provide physical notes even if it launches a digital dollar at some point in the future. “Cash isn’t going anywhere,” the bank said.
Eleven countries have launched digital dollars, including the Bahamas and Nigeria. Other countries, such as China and India, are conducting large-scale pilot programs.
The idea of CBDCs is not without controversy. Some commercial banks worry that the ability to keep digital money directly at the central bank could undercut commercial bank deposits. The Canadian Bankers Association issued a warning about CBDCs last year, arguing that they could undermine commercial bank funding and decrease competitiveness in the financial system.
Some politicians have also raised concerns about privacy, with electronic money being inherently less anonymous than physical cash. Conservative Party leader Pierre Poilievre has said he would not allow the launch of a CBDC.
The Bank of Canada said it will publish a report on its consultations later this year.
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