Crypto Boom 2.0? Canada Expedites Intent To Issue CBDC
the Canada it is among the main countries among the main central banks that are exploring the possibility of issue their own digital currencies (CBDC) for the public. As recorded in a Press release from the European Central Bank on January 21, 2020:
“The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Sveriges Riksbank and the Swiss National Bank, as well as the Bank for International Settlements (BIS), have created a group to share their experiences while they assess potential cases of central bank digital currency (CBDC) in their home country. “
Currently there are more than 5,400 cryptocurrencies and over $ 256 billion market capitalization. These figures show that many people around the world have realized the benefits of cryptography, and now it seems that governments too want to get involved.
Canada Accelerates Plans For CBDC
Among the countries mentioned above, Canada has made great strides toward achieving a cashless future. The Bank of Canada is creating a portfolio of initiatives designed to prepare the country for the future of transactions.
Initiatives include the creation of the structure for the issue of a CBDC similar to cash for Canadians, as an emergency solution when needed. Like cash, the CBDC generates no interest and will be universally accessible.
The Bank of Canada has identified two scenarios that could lead to this decision:
- Scenario 1: In case the use of banknotes is reduced to the point that Canadians are no longer able to use them for a wide range of transactions.
- Scenario 2: In the case where an alternative cryptography, perhaps emitted by companies of the private sector, is widely adopted as an alternative to the Canadian dollar as a method of payment and storage of value.
In one of the scenarios described above, Canada will face the challenges of a cashless economy, such as lack of central bank protection, lack of universal accessibility, privacy concerns and methods of payment. not resilient, because citizens will try to buy Bitcoin in Canada.
To avoid the challenges that could be caused by the occurrence of the scenarios described above, the Bank of Canada proposed a possible project that would provide a CBDC that promotes public acceptance, adoption and use.
The design features of the Canadian CBDC
According to the Bank of Canada, a feasible technical project from a CBDC may require several years of in-depth interaction with stakeholders and Canadians. However, some stakeholder analysis work has clarified the design and potential adoption of a CBDC. The final design must support these attributes:
- Similar to cash – The CBDC guarantees user confidentiality, immediate transfers and high resilience to infrastructure failures, just like cash or even better.
- Relevance – Technology must adapt to the dynamic digital world, such as online use. At the same time, the technology would be adaptable with the improvement of electronic transactions with the Internet of Things (IoT) and other developments in sight.
- Interest payments – The CBDC system envisaged must know the interest rates and the time of the transaction to be technically feasible.
- Interoperability – The CBDC must be integrated into existing payment systems. At least, connections to other financial systems should allow users to enter and exit from a CBDC, or rather existing payment systems could also provide transaction services to a CBDC.
- Accessibility – The CBDC designed to be extensible because the gadgets used by users, such as smartphones, computers and connected watches, evolve over time. The system must also be accessible to everyone and usable by all citizens, regardless of their location and age.
The widespread adoption of cryptocurrencies has opened the world to a new reality linked to the future of payments. Realizing that the future is almost uncertain, central banks around the world have undertaken the road to public digital currencies.
For example, Canada has spent more than 6 years studying the economic impact of digital currencies, including Bitcoin and stable coins. The most recent developments clearly indicate that Canada’s vision to replace species with a CBDC is active and ongoing.
“It is clear that technology is changing the world around us. And even if we cannot perfectly predict the future, we can certainly plan for the unexpected ”, he said Timothy Lane, Deputy Governor of the Bank of Canada, speaking at CFA Montreal FinTech RDV 2020.
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