OTTAWA (Reuters) - The Bank of Canada said on Tuesday it has no plans to issue a central bank digital currency at this time, but preparations are underway to create capacity to do so should Canada’s payment ecosystem change.
In a speech to a business audience in Montreal, Bank of Canada Deputy Governor Tim Lane made no mention of future rate moves. He said the bank had concluded there was “not a compelling case” for the issuance of a central bank digital currency (CBDC) at this time and outlined two primary scenarios that could warrant the consideration of such a policy move.
“The first is where the use of physical cash is reduced or eliminated altogether,” he said. “The second is where private cryptocurrencies make serious inroads.”
Canadians, he added, are currently well-served by their current payments ecosystem, which is in the process of being modernized. Meanwhile, developing the capacity to issue a CBDC is expected to take several years.
CBDCs are traditional money, but in digital form, issued and governed by a country’s central bank. They differ from cryptocurrencies, like bitcoin, which are governed by disparate online communities and are produced by solving complicated math problems.
The Bank for International Settlements has found a growing number of central banks are likely to issue their own digital currencies in the next few years. While most of those launching pilot schemes are from emerging economies, China is the closest major economy to become the first to issue a CBDC. [L4N29R45W]
On Tuesday, Lane said the Bank of Canada plans to consult with a wide range of stakeholders as it designs the capacity for a central bank digital currency.
Those consultations, he said, would include discussions with federal and provincial governments and regulators, payment service providers, and merchants.
The Bank of Canada, which has kept interest rates unchanged since October 2018, opened the door in January to a possible cut should a slowdown in the Canadian economic growth persist. The central bank’s next interest rate decision is set to be released on March 4. [nL1N29P0WW]
Reporting by Kelsey Johnson in Ottawa; Editing by Dale Smith and Sandra Maler