The public’s use of online services has increased during the pandemic, prompting the Bank of Canada to look into ways that a central bank digital product might be distributed and accepted quickly.
The Bank of Canada’s Deputy Governor Tim Lane discussed the possible development of a CBDC (central bank digital currency) – however, no firm plans are in place to introduce such a currency to the public. Ever-increasing technological trends, along with people shifting their activities online because of COVID-19, have caused the Bank of Canada to consider the value of a digitalized central bank product in widespread use.
Lane added that the Bank of Canada needs to move quickly in order to get the maximum benefit from such a development. Online purchases using payment cards could be made obsolete if a digital currency is introduced, as such a product would replace the need for direct cash and simplify the transaction process.
According to Lane, a CBDC could be launched by the Bank of Canada if private cryptocurrencies make a noticeable impact on the economy.
As new digital currencies are developed, such as Facebook’s own stablecoin Libra, the rules to govern them are being set by central banks globally in response. If the Bank of Canada were to introduce a CBDC, Lane has said that discussions with stakeholders, financial institutions, banks and technology companies would be needed.
Financial leaders of the world’s seven biggest economies have warned that launching any stablecoin operation is not recommended, unless controls are in place to manage the currency properly.