Canada’s central bank is reportedly laying the foundation for possible issuance of a central bank digital currency (CBDC) while maintaining that the present situation of things does not call for the country to develop a sovereign virtual currency.
Meanwhile, more than a dozen other nations are reportedly considering the creation of their own CBDC with China supposedly leading the global CBDC race with its project already reaching advanced stages.
No Need for Central Bank Digital Currency Yet
According to Bloomberg, Canadian central bank officials think that a central bank digital currency will only become a necessity if private cryptos threaten to disintermediate the mainstream private architecture. According to a statement from the Bank of Canada:
“If one or more alternative digital currencies threatened to become used widely as an alternative to the Canadian dollar [then] there would be an argument for the Bank of Canada to step in.”
Since the emergence of Facebook’s digital payments project — Libra, several countries have begun to consider the possibility of launching their own central bank digital currency. For Canada’s central bank, successful deployment of a private crypto service like Libra may force the bank into accelerating any plans to launch a digital Canadian dollar (CAD).
Apart from a broad-based adoption of Libra, Canada’s apex bank says policies that require the restriction or elimination of cash could cause a pivot towards a CBDC. In places like Lebanon, commercial banks have been forced to enact informal cash restrictions following economic troubles which broke out late last year.
Bank Confident About CBDC Preparedness
Despite arguing against the need for a central bank digital currency, Canada’s apex bank says it is putting modalities in place to be able to float a digital currency if required. Tim Lane, Deputy Governor of the Bank of Canada remarked:
“We need to move forward to work out what a potential CBDC might look like and how it could be managed, if the decision were ever taken to issue one.”
Lane’s comments echo the sentiments espoused by Masayoshi Amamiya, Deputy Governor of the Bank of Japan (BOJ) back in January 2020. Like Lane, Amamiya opined that the country did not need a central bank digital currency at the moment but should be prepared to issue one in the future if necessary.
Global financial establishments like the International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have called on central banks to consider CBDCs. Agustin Carsten, head of the BIS warned back in December 2019 that central banks could lose their place as gatekeepers of the financial world to private cryptos.
The Bank of Canada is already involved in some development work regarding central bank digital currencies. The country’s apex bank is part of a recently formed think tank along with central banks from Japan, Sweden, Switzerland, as well as the BIS and the European Central Bank (ECB). The CBDC think tank will reportedly hold its inaugural meeting in April 2020.
Latest CBDC Updates from Across the Globe
With 18 different central banks I various stages of CBDC research and development, the race appears well and truly on to be the first country to successfully launch a sovereign digital currency. China’s progress with its central bank digital currency has reportedly hit a few snags owing to the coronavirus outbreak in the country.
However, reports suggest that authorities in Beijing still plan to launch the test pilot for the CBDC before the end of 2020. As previously reported by Blockonomi, the U.S. Federal Reserve is also considering the creation of a digital dollar while ECB policymakers say European banks should create their own CBDCs as a counter to Libra and other private cryptos.