Yesterday the Bank of Canada published a report discussing the key motivations for a central bank digital currency (CBDC). The paper detailed the primary benefits of developing a Canadian digital dollar: increased competition amongst payment service providers and digital innovation.
The authors identified two primary triggers for issuing a CBDC, the first being a declining use of cash that is not currently on the horizon. The second is the role of a CBDC in responding to the surge of alternative digital currencies, which could threaten Canada’s monetary sovereignty.
“Overall, the likelihood of the widespread adoption of an alternative digital currency not denominated in Canadian dollars remains small. Granted, the risk of this scenario has increased with the rapid development of other CBDCs and the efforts of consortiums such as Diem to launch a global stablecoin arrangement.”
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