Canada’s national bank is exploring the possibilities of launching a digital currency. The new currency would also act as an information-gathering tool, specialized in generating information about how people spend money.
Bank of Canada’s Governor Stephen Poloz did a presentation about the future of digital money, specifying that the currency would initially coexist with fiat, before replacing traditional cash completely. The presentation was prepared by adviser Stephen Murchison, leading the cryptocurrency research for Bank of Canada.
In the “Central Bank Money: The Next Generation” presentation, Poloz stated that such a move comes amid global concern about the implications of digital currencies. China is preparing for a central bank yuan-backed digital currency, and Facebook continues the development of its Libra stablecoin.
“We need to shift ourselves towards innovation – bringing the benefits of central bank-issued currency with the security and ease of use of electronic payments,” the presentation reads.
“Adding a payment method could result in a more robust payment system in general,” Poloz noted.
The presentation implies two use cases of the new digital currency – token-based and account-based. The main concern is the fact that traditional money is becoming obsolete, and “banknotes would become too costly for merchants to accept as a payment method.”
Cryptocurrencies, however, are also a concerning factor for many, as “ordinary Canadians would lose access to central bank money.” Implementing monetary policies in the rise of cryptocurrencies is also a significant problem for central banks.
Bank of Canada is looking closely at cryptocurrencies since 2013. In the past two years, however, the problem with the decentralized cryptos is becoming more prominent. In October 2018, a Financial Stability Board group published a report stating that cryptocurrencies may shake the foundations of the traditional global financial framework. The document also pointed out the steps central banks could implement to avoid such a consequence.