With the rise of cryptocurrencies and a digital future, the Bank of Canada is preparing itself for a time when a central bank digital currency may be necessary. Currently the bank doesn’t see a compelling reason to implement such a system just yet, however that doesn’t mean they haven’t already been looking into it.
At Fintech RDV 2020, Deputy Governor Timothy Lane spoke about the subject and how the bank plans to implement a CBDC should the time come for one. First, there are two scenarios that could warrant implementing such a system, with the first being a huge reduction in the usage of cash and privacy concerns surrounding cryptocurrency. With these scenarios, the bank will implement a CBDC that is safe and easy to access, similar to cash, while remaining digital and that users could use to purchase things online and even in person at a shop.
As of now, there aren’t any concrete plans or prototype systems. Despite this, the bank is consulting with experts to help answer question, such as:
• What design features might make a CBDC attractive for merchants and users?
• How would a digital currency work with other methods of payment?
• How would a CBDC work for cross-border transactions?
• How can we protect privacy while preventing illicit uses?
Timothy Lane ended the speech by saying that although a time may come when a CBDC will be implemented, cash will still exist alongside it and that Canadians who wish to use cash may do so.