The Bank of Canada is looking into the idea of establishing a central bank digital currency (CBDC), commonly known as a digital version of the Canadian dollar.
What is a Canadian dollar in digital form?
An electronic version of the money in your wallet would be a digital Canadian dollar, to put it simply. It could be used as cash to purchase the items you require. The advantage is that you may use it to send money to relatives and friends and make online purchases as well. Additionally, companies might use it to pay one another.
It would be similar to cash in that it would be secure, universally available, and private. The Bank of Canada would be the issuer of this new kind of money.
A digital Canadian dollar, however, wouldn't take the place of currency; we'll keep issuing bank notes as long as Canadians desire to use them.
A digital dollar is not yet necessary in our opinion. However, Canada might require one in the future, so we must prepare.
How will this dollar be different from cryptocurrencies?
A digital Canadian dollar, commonly referred to as a cryptoasset or private digital currency, is not a cryptocurrency. The value of cryptocurrencies, such as Bitcoin, fluctuates wildly and frequently in relation to the Canadian dollar. These currencies may charge high transaction fees, take a while to process, and offer few options for recourse in the event of a problem. Because of this, people typically invest in cryptocurrencies rather than use them for daily purchases.
In contrast, because a digital Canadian dollar is just another variation of the current currency and is backed by the government's central bank just like cash, its value would not change. Accordingly, $10 in digital Canadian dollars would always be equivalent to $10 in cash. Our objective is to create a digital Canadian dollar that is quick and inexpensive to use, just like currency is right now.
Why is the Bank looking into developing a digital dollar?
The Bank of Canada has a duty as the central bank of Canada to make sure that everyone is always given the chance to participate in the economy. They also need to get ready for whatever the future may bring. For this reason, they are looking into the prospect of releasing a digital version of our national money, much like many other central banks around the globe.
The decision to create a digital Canadian dollar will ultimately be made by Parliament and the Canadian government.
Final Notes:
The Bank of Canada provides Canadians with banknotes and ensures that they have faith in the value of the Canadian dollar. Cash can be used by anyone, even those without a bank account, credit history, or official identification.
The majority of payments are now digital, such as those made with debit or credit cards, therefore individuals use cash less frequently these days. If this pattern persists, there might come a day when currency isn't often accepted in everyday transactions, which might cut off a lot of Canadians from the economy.
Watching out for the best interest of the economy
Future widespread use of cryptocurrencies or CBDCs produced by other nations is also conceivable in Canada. This would jeopardise the Canadian dollar's crucial position in our economy and jeopardise the stability of our financial system.
By ensuring that Canadians always have an official, secure, and stable digital payment option in the Canadian currency, a digital Canadian dollar might help safeguard our economy. Furthermore, only a central bank can ensure that the public interest—and not financial gain—takes precedence.
Cash would still exist, but a digital dollar would not replace it. Even if we establish a digital currency, Canadians will still be able to purchase bank notes. Therefore, those that favour cash may continue to do so.
