Bank of Canada’s Deputy Governor Tim Lane stated that the central bank of Canada is studying the possible implementation of central bank-issued digital currencies. Despite Canadians being among the top countries based on banking services, Bank of Canada would seek to understand further the requirements and features of using digital currencies.
However, Tim Lane stated that at least at present times, the Bank of Canada sees no real urgent need to deploy a CBDC, despite the bank issuing plans for prototyping such a currency.
“The financial sector is evolving, so we need to stay relevant to the situation and move forward with the potential CBDCs might bring, as well as how such a project should behave and look like,” Lane stated.
The move by the Bank of Canada comes amid more and more government-run banks exploring or developing central bank digital currency projects. China, for example, as well as Sweden may become the first major bank players to roll out CBDC projects.
Tim Lane managed to come up with two scenarios for the usage of CBDCs by the Bank of Canada: if there is a shortage or elimination of fiat Canadian dollar, as well as the push from private cryptocurrency projects, like Bitcoin (BTC) or Ethereum (ETH).
“Despite the scenario, there will be enough argumentation for us to step up and issue a CBDC project. The Bank of Canada would be in the role of a trusted public service provider, with a top priority of maintaining public interest”, Lane noted.
Bank of Canada and cryptocurrencies did not collide for the first time – the government institution published several reports regarding the potential positive and negative effects of digital currencies on Canada’s economy. Some of the topics included issues like decreased private bank market power, as well as liquidity issues. However, Bank of Canada is ready to work on a live prototype, despite having no timeframe for a public test, as well as a firm confirmation on the possible launch of such a project. Also, the Canadian government has to create and vote a regulatory framework, which currently absents from Canada’s financial policy laws.
“Central bank digital currencies may be a perfect solution for keeping monetary sovereignty by providing an alternative for private digital currency projects,” Lane concluded.
Earlier this month, Sweden’s central bank announced it entered the first phase of tests for Sweden’s e-krona CBDC project. If tests are successful, the Swedish government will start gradually implementing the e-krona into circulation, as only 1% of the gross domestic product of Sweden is in the form of fiat cash.