The Central Bank of Canada has recently announced that it is making plans to create its own digital currency according to a Tuesday report by TheStar.
During his speech at a financial technology conference in Montreal, Quebec, the deputy governor of the Bank of Canada, Timothy Lane, said that the central bank is going to work towards creating its own digital currency. The bank, however, currently has no plans of issuing a central bank-backed cryptocurrency for use.
Creating digital currency as a contingency
According to Lane, there was no apparent reason for the bank to issue a digital currency right now, although he mentioned two possible situations that could lead to the issuance of the Central Bank Digital Currencies (CBDC) in the future.
The first situation is where the use of physical cash in transactions is either reduced or totally eliminated. The second is where private digital currencies become widely adopted. Thus, the decision to create a digital currency by the Bank of Canada is not to issue the digital currency right now, rather, to keep it as a backup plan in the event that physical cash is no longer used.
Lane said that the bank will consult several government agencies and financial regulators including the Finance Department regarding the designs of the digital currency.
He also added that there are several issues to be analyzed such as how to ensure that anyone in the country, including those who have little to no access to the internet and those who have no bank accounts, can make use of the digital currency.
There is also the issue of how to prevent money laundering and the use of digital currencies to fund crimes.
The Bank of Canada has spent has since been researching the effect of the growth of volatile cryptocurrencies, such as Bitcoin, on both technology and the economy and how digital currency can be used to replace cash.