Federal Document Tips to Eliminate the Economic Impact of the Central Bank’s “Digital Looney”

Ottawa — According to internal government documents, if the Bank of Canada issues its own cryptocurrency, treasury officials believe it could have a significant impact on the economy.

The Bank of Canada has spent years considering whether to introduce digital currencies, but so far it is not necessary to issue digital currencies immediately.

In one of the briefing notes last January, authorities warned Finance Minister Chrystia Freeland that the issuance of central bank digital currencies would have “widespread implications for the economy, the financial system, and the Bank of Canada’s operations.” did.

The document also shows that the central bank held a series of meetings with federal authorities during 2020 to assess the impact of “digital looney” on departments and institutions.

A large number of documents obtained by the Canadian press under the Information Access Act are blacked out because the ministry states that it contains sensitive government information.

But what remains suggests federal concerns about central bank digital currencies, and the department wants to provide more information before a decision is made.

The Bank of Canada is accelerating the pace of work on digital currencies, reflecting the efforts of counterparts in other countries, as the COVID-19 pandemic is accelerating the transition to a digital economy.

Banks plan to issue digital currencies only when the use of physical invoices for transactions plummets and one or more private cryptocurrencies, such as Bitcoin, become widely used in Canada doing.

Governments and central banks, as the name implies, are paying more attention to planned stablecoins, which are variable in value and backed by cash and government securities.

Jeremy Chronic, Research Associate Director of the CD Howe Institute, said the use of private cryptocurrencies tied to the US dollar in Canada would put a strain on the Bank of Canada’s ability to manage monetary policy for the benefit of the country. ..

He said banks need to incentivize private cryptocurrencies to use the Canadian dollar as a backing.

“The government can put this down in a blink of an eye. The government can say,’Forget, you can’t trade in Canada,'” he recently co-authored a paper on the benefits of the Bank of Canada’s digital currencies. Mr. Chronic said.

“I don’t think they want it because the private crypto that people like has its benefits, but we also want to maintain its good public function. To do that, (Central Bank Digital) I think the currency) is the way to go. “

According to a central bank survey, the potential for Bitcoin users is optimistic about the future of Bitcoin, as the more people who adopt Bitcoin, the more likely it is that others will follow suit. It has to do with how the user feels.

A paper published in November states that Bitcoin adoption in Canada remains low at around 5%. The authors suggest that young Canadians are more likely to use Bitcoin because it is easier to buy digital currencies than to open a formal bank account.

The Bank of Canada does not have legislative power from Congress, which provides digital currencies, it only designs, issues and distributes invoices packed in wallets and passed to counters.

The Treasury has reviewed CBDC’s central bank digital currency legislation, but in an email in March, other countries had “intentionally amended legislation” to allow it. It states that it is not.

E-mail reports on whether central banks should have the power to issue digital currencies, even in Sweden, which is “widely considered to be at the forefront of the move to CBDC among developed countries.” He said he was looking forward to it later next year.

How fast Canadian officials move will likely depend on how fast major stablecoins are deployed, Chronic said. He specifically pointed out Facebook’s planned Stablecoin. It’s easily adopted by social media giant users.

“I want them to get ahead of it, but the government is famous for being slow until they have to,” Chronic said.

Along Jordan Press

Canadian press