September 21, 2021
The Bank of Canada is considering issuing its own digital currency in competition with bitcoin (BTC), seven years after the bank quietly killed a similar initiative by the Royal Canadian Mint, according to Blacklock’s Reporter.
“A central bank digital currency could be necessary in the future to ensure a competitive digital economy,” researchers wrote in a report, The Positive Case For A CBDC.
The bank called BTC “a novelty for a small number of enthusiasts in Canada” – fewer than 10% of Canadians own it – but warned if widely adopted it would be “out of reach for Canadian regulators.”
“Cash remains widely accepted,” wrote researchers, who added: “The long term, however, is less clear because if the trend towards less acceptance continues the function of cash as a medium of exchange will eventually erode, likely leading consumers to look for more convenient stores of value.”
“It is important to highlight the bank is committed to supplying cash for as long as Canadians demand it,” said Positive Case.
“Therefore, if most Canadians moved away from cash it would be due to the choice of consumers.”
The bank complained credit cards “come at the expense of high fees for retailers which they eventually pass onto customers,” and that electronic currency could become popular in the future.
“As modern economies become increasingly digital, bringing not only competition challenges but also large economic opportunities, central banks are considering whether they should provide a form of digital central bank money for use in everyday retail payments,” said the paper.
The Royal Canadian Mint in 2012 launched its own BTC alternative called MintChip for small transactions under $20. Bank of Canada managers ordered a halt to the program in 2014.
“We issue Canadian dollars,” Grahame Johnson, then-chief of funds management at the bank, testified at 2014 hearings of the Senate banking committee.
“We couldn’t issue another currency. In terms of digital currency, it is not under the current legal framework.”
The bank earns $1.6 billion annually by printing and circulating banknotes.