Today the Bank of Canada opened a public consultation around a potential central bank digital currency (CBDC), or digital Canadian dollar. The CBDC consultation will run until June 19.
While the central bank believes a retail CBDC is not currently needed, Senior Deputy Governor Carolyn Rogers said, “As Canada’s central bank, we want to make sure everyone can always take part in our country’s economy. That means being ready for whatever the future holds.”
It elaborated on two potential motivations for a CBDC. One is where cash use declines to such an extent that it’s no longer accepted, which could financially exclude groups of people.
The other is around maintaining monetary sovereignty. As a neighbor to the United States, there’s some risk it becomes dollarized, whether through a CBDC or a U.S. dollar stablecoin. Although the U.S. wasn’t explicitly referenced, it mentioned the possibility of a cryptocurrency or foreign CBDC becoming widely used within Canada, potentially impacting its financial stability. This is a concern it’s held for some time.
Rogers continued, “We want to hear from Canadians about what they value most in the design of a digital dollar. This will help us make design choices and ensure that it is secure, reliable and meets the needs of Canadians.”
One of the challenges for all CBDCs is private competition. There are plenty of digital payment alternatives, so the Bank of Canada wants to know how people want to use a CBDC, which security features are important, and the sticky issue of privacy.
The MIT Media Lab Digital Currency Initiative has been working with the central bank as part of its research work. The central bank has also published several papers on topics such as the types of offline usage of a CBDC and CBDC storage.
While many central banks became interested in CBDC after Facebook unveiled plans for its Libra digital currency, by then, Canada already had multiple initiatives under its belt. These included Project Jasper for securities settlement and cross broder payments with Singapore as part of Project Ubin.