Canada’s Central Bank Issues White Paper on Government-Backed Digital Currency

Nicehunt  | By Christopher Thomas Williams  | Dec 8, 2017

Central Bank Issues White Paper on Government Backed Digital Currency - Canada’s Central Bank Issues White Paper on Government-Backed Digital Currency

A recent Canadian Central Bank white paper explores the feasibility and potential consequences of introducing Central Bank Digital Currency.

The white paper mentions the use of bank notes has declined in Canada over the past two decades relative to the country’s GDP. It mentions that in countries which are closer to becoming truly cashless, such as Sweden, central banks may soon be forced to take an active stance on whether to issue digital currency.

However, the paper notes that in Canada’s case, it would be undesirable for digital currency to completely replace banknotes. Canada is a large country with huge swathes of sparsely-populated land. A total switch to digital currency would be more feasible in countries with populations concentrated in large urban centers, such as most of Europe, along with East Asian countries like Japan and South Korea.

In Canada’s case, banknotes will still be necessary to conduct transactions in isolated rural areas with limited internet access. Interestingly, the paper envisions people in these areas using United States banknotes if Canada was to completely replace Canadian banknotes with digital currency.

See: Canada Central Bank Votes ‘No’ On Blockchain — For Now

The paper also shoots down a few of the proposed effects of a switch to digital currency. It concludes that digital currency is unlikely to affect the central bank’s ability to manipulate interest rates. It is also unlikely to be any more or less desirable for use in criminal activity than hard currency.

Concerns over enabling criminal activity would mean that digital currency would be unlikely to provide full anonymity. However, the paper dismisses the idea that digital currency would make it easier to track how money is being used and effectively cut off funding from criminal enterprises.

Another often-touted benefit of cryptocurrency is that allows those without bank accounts to easily store money and make transactions. This is could have a big effect in developing countries, but the paper mentions that very few people are excluded from the banking system in developed countries such as Canada.

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