Blockchain for Banking News

Canada exploring consumer CBDC to replace cash

canada dollar currency

Yesterday, the Financial Post reported that the Bank of Canada has been working on a public central bank digital currency (CBDC) to replace cash. The news came to light after the release of an internal presentation given in September last year to the bank’s board of directors.

It revealed that the head of digital currency research at the time, Stephen Murchison, wrote: “We need to innovate to stay in the game,” and that CBDC would have “all the benefits [of cash and] all the convenience and security of wireless, electronic payments.” Though his presentation is over a year old, the Post reports that the research on a public-focused currency is ongoing.

Canada has been exploring digital currencies and blockchain for some time, but for institutional use. For example, blockchain Project Jasper for Canadian securities was launched in 2016. It reached its third phase in partnership with Accenture and R3 last year. More recently, the Bank of Canada successfully used a CBDC in a test payment with the Singapore central bank.

Until yesterday, there was no confirmation that Canada was exploring a digital currency for consumers. According to the report, researchers looked at a CBDC which would eventually replace cash, due to the convenience and traceability of digital assets.

Though many central banks are considering CBDCs, 70% of them according to the Bank of International Settlements (BIS), few are publicly working on one for mainstream use. As the BIS said in a separate talk, a cash-like CBDC brings significant risks. One of these being consumers using central banks, which are not equipped for personal use.

China has circumvented this issue in its plans to release a digital currency for citizens. Its central bank will instead distribute the CBDC to consumer-focused banks and payment organizations, which will then issue it to users.

While China, Singapore, and Canada are some of the leading nations in CBDC research, they are not alone. Just last week, the Swiss National Bank announced plans to establish innovation hubs with the BIS and SIX for digital currencies. Korea has also explored them, and Thailand ran a CBDC test earlier this year.