The Bank of Canada is seeking public input on the possible launch of a digital Canadian dollar. Known as a central bank digital currency (CBDC), a digital loonie would be the virtual form of Canada’s fiat currency backed and issued by the Bank of Canada. The popularity of cryptocurrency and the rise of a cashless society has made CBDCs of particular interest to nation states.[1]
Launched on May 8, 2023, the Bank of Canada’s news release on the public consultation makes two important points:
- At the moment, Canada has no plans to launch a digital loonie. The Bank of Canada’s research on a CBDC is contingency planning in case the decision to launch one is made in the future.[2]
- Even with the launch of a CBDC, Canada would not abolish paper money, and the Bank of Canada would “continue to supply bank notes as long as Canadians want to use them.”.
The public consultation follows the February 25, 2020 contingency planning by the Bank of Canada which noted:
- Protecting monetary sovereignty would be a key impetus for the launch of a CBDC as many central banks became concerned after Facebook announced its intent to launch the Libra cryptocurrency.[3]
- If launched, the CBDC would never offer a cash-like degree of anonymity due to abuse potential. The CBDC would likewise not be implemented on a public and permissionless blockchain to ensure well-controlled disclosure of information.
The public consultation takes the form of an online survey asking which features of a CBDC are most important and most worrisome to citizens. The Bank of Canada intends to publish a report summarizing the survey results and use it to inform “policy and design decisions” on the possible launch of a CBDC. The survey is available online until June 19, 2023.
[1] According to the Atlantic Council, as of December 2022, 114 countries (representing over 95% of global GDP) were exploring the launch of a CBDC.
[2] Currently, it is unlikely the Bank of Canada has the legal authority to launch a digital dollar as the Bank of Canada Act does not provide express authority to issue digital currency. It would be up to Parliament to provide this authority.
[3] Facebook announced the Libra (later renamed Diem) cryptocurrency summer 2019 with the first release planned for 2020. Due to intense regulatory pressure and public criticism, Facebook killed the project.