Canada's central bank weighs its own digital currency
There’s much talk among the world’s central banks about cryptocurrencies. Should they be banned? Regulated? Or, if you can’t beat them, maybe join them?
The Bank of Canada is weighing the possibility of launching its own digital currency to take on Bitcoin and its peers.
It’s very early days but in a staff research paper the bank examines why a central bank might want to issue a publicly-available cryptocurrency; what the impact would be; and the different models to consider.
The paper highlights the “considerable impacts” on the financial system and potentially the wider economy of cryptos and the underlying blockchain technology.
It focuses on the bank’s reserves that are only available to select financial institutions via the payments system and asks whether these funds could be accessed by the general public through a bank-issued cryptocurrency.
The report examines issues such as reduced access to central bank reserves by the public as bank note usage declines; whether a cryptocurrency would positively impact the lower bound on interest rates; promote financial inclusion; and reduce criminal activity.
It also considers whether there would be a net gain for financial stability and how payment contestability could be improved for retail.
The paper concludes that the potential for a central bank to issue its own cryptocurrency is a complex one and requires further research and possibly a small-scale experiment to learn from experience.
However, the tone of the paper suggests that there are many aspects of central bank function that would not be significantly improved by issuing a crypto – so don’t hold your breath for BoC-Coin anytime soon!
The Bank of Canada is weighing the possibility of launching its own digital currency to take on Bitcoin and its peers.
It’s very early days but in a staff research paper the bank examines why a central bank might want to issue a publicly-available cryptocurrency; what the impact would be; and the different models to consider.
The paper highlights the “considerable impacts” on the financial system and potentially the wider economy of cryptos and the underlying blockchain technology.
It focuses on the bank’s reserves that are only available to select financial institutions via the payments system and asks whether these funds could be accessed by the general public through a bank-issued cryptocurrency.
The report examines issues such as reduced access to central bank reserves by the public as bank note usage declines; whether a cryptocurrency would positively impact the lower bound on interest rates; promote financial inclusion; and reduce criminal activity.
It also considers whether there would be a net gain for financial stability and how payment contestability could be improved for retail.
The paper concludes that the potential for a central bank to issue its own cryptocurrency is a complex one and requires further research and possibly a small-scale experiment to learn from experience.
However, the tone of the paper suggests that there are many aspects of central bank function that would not be significantly improved by issuing a crypto – so don’t hold your breath for BoC-Coin anytime soon!
