Will the Bank of Canada be issuing its own digital currency soon?

There are lingering concerns on how e-money will work in tandem with the central bank’s current operations

Will the Bank of Canada be issuing its own digital currency soon?

A senior Bank of Canada official has said that while the institution is currently developing its digital currency and how this will work in tandem with its current operations, it does not currently see a sufficiently compelling reason to go ahead and issue its own e-money.

Deputy Governor Timothy Lane said that the central bank is open to any real justification, which may include a cryptoasset’s sudden rise in popularity or a significant decline in cash usage nationwide.

“In terms of where we are with the project … we don’t currently see a strong case for issuing it, but the world is progressing very rapidly,” Lane said in a recent discussion, as reported by Reuters.

“We’re now at a phase where we’re actually thinking in more concrete terms of, well if we were going to launch something … then what would it look like, what attributes would it have, and how would it connect with the rest of the financial system?”

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However, Lane stressed that the planned digital currency still has a long way to go before it fully materializes, despite the BoC having already conducted “proof-of-concept” experiments with some partners in the private sector.

Among the chief concerns is the security of clients’ personal information. Aside from ensuring privacy, sufficiently rigid data security and vetting will also prevent the use of the bank’s digital money for illicit purposes.

A report by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) a few years back warned that e-currency is at greater risk of money laundering due to a lack of mitigating measures.

“While recognizing that not all transactions that use mixing services are illicit and that some users have legitimate reasons to seek greater anonymity, the capacity of mixers to break and hide the links between users and their transactions make them attractive tools for illicit actors,” a FINTRAC spokesperson told The Globe and Mail at the time.