A public consultation into a potential Canadian central bank digital currency (CBDC) will take place in 2023, Bank of Canada’s governor has said.
Tiff Macklem referenced the plan during an event hosted by the Business Council of British Columbia during which he emphasised that whether the country proceeds to create a CBDC is “ultimately a decision for parliament” but that “we certainly want to make sure we’re ready.”
Macklem said the central bank was “moving more from the ‘R’ part of ‘R&D’ [research and development] to the ‘D’ part” in terms of its CBDC work, saying that “over time it is conceivable that, in a more digital economy, it might make sense to give Canadians the ability to hold central bank money in digital format.”
Further reasons – albeit “defensive” ones – to launch a CBDC include a situation where a private stablecoin, “particularly one not denominated in Canadian dollars” (the ill-fated Facebook-funded Libra/Diem project was referenced as an example), were to “catch on” or if demand for traditional notes and coins were to decline rapidly, Macklem told the audience. But “demand for bank-notes continues to rise [and] is certainly not collapsing,” he pointed out.
Despite the apparent lack of urgent pressures to launch a CBDC, Macklem – who has been Bank of Canada governor since 2020 – said a consultation was scheduled for next year. “We want to know: what are Canadians’ interests in a digital currency, what are their expectations, what sort of elements would be important to them,” he explained during a Q&A session that followed a speech focused on emphasising the central bank’s commitment to get inflation down to a target of two per cent.
Bank of Canada’s CBDC journey
Bank of Canada described itself as ‘ramping up contingency planning’ for a CBDC almost two years ago (in February 2021), at the time publishing three CBDC design proposals from the University of Calgary, McGill University and the University of Toronto/York University (Toronto).
The Ottawa-headquartered authority had set out one year previously (in February 2020) how – ‘as a contingency plan only’ – it was ‘building the capacity to issue a retail, cash-like CBDC should the need to implement one ever arise’. But it said that ‘significant work’ was required to achieve such a state of readiness.
‘In the years ahead, the Bank will conduct its work on a CBDC in a transparent manner, with regular consultations with stakeholders at home and abroad and public presentation of conclusions and issues, as they emerge,’ the central bank noted at the time.
Bank of Canada staff have also been co-researching CBDCs alongside officials at the US Federal Reserve, BoE, Bank of Japan, Sveriges Riksbank (Sweden), Swiss National Bank, the Switzerland-headquartered Bank for International Settlements (BIS) and ECB. The central banks jointly published an influential report, ‘Central bank digital currencies: foundational principles and core features’, highlighting three ‘key principles’ for a CBDC in October 2020.
As a member of the Group of Seven (G7) nations, Canada was also a contributor to 13 public policy principles for the implementation of retail CBDCs published by the G7 in October 2021.
CBDC commonalities with the UK
Central banks worldwide are stepping up their explorations into the possibilities of CBDC, with China’s development of its ‘digital yuan’ cementing its status as the frontrunner among major nations. The Reserve Bank of India (RBI) has also just kicked off the first phase of a CBDC pilot in four cities and involving four banks.
The European Central Bank, meanwhile, is more than half way through a two-year ‘investigation phase’ into the possibility of a CBDC for the 19-member eurozone.
Canada seems to be moving at a relatively similar pace to the UK. The two nations’ central banks share the fact that they have spent most of this year independently collaborating with the Massachusetts Institute of Technology (MIT) on 12-month CBDC research partnerships. Both Bank of Canada and the Bank of England (BoE) are working with the MIT Media Lab’s Digital Currency Initiative (DCI) team, with the Bank of Canada’s MIT link-up and the BoE’s MIT link-up announced separately in March.
Bank of Canada is working with MIT to explore how advanced technologies could affect the potential design of a CBDC, according to the March announcement. The central bank said the collaboration would focus on ‘exploring and experimenting with potential technology approaches to determine how a CBDC could work’.
A further cross-Atlantic commonality is that a consultation on a potential CBDC is also imminent in the UK. Chancellor Jeremy Hunt said just last week that the authorities would be ‘bringing forward a consultation in the coming weeks to explore the case for a central bank digital currency – a sovereign digital pound – and consult on a potential design’. The UK CBDC onsultation was promised more than 12 months ago.
FURTHER READING
=>>> Global Government Fintech’s dedicated Digital Currencies section <==
‘Canadian government defends innovation policy record after fintechs’ criticism’ – our news story published earlier this week (12 December 2022) on trade association Fintechs Canada (formerly operating as Paytechs of Canada) marking the announcement of its new identity by criticising ‘slow progress on innovation policy’
‘Canada legislative review to tackle challenges posed by digital money’ – a news story (13 April 2022) on Canada’s government announcing a financial sector legislative review focused on the digitalisation of money and maintaining financial stability and security (the plan was contained in the country’s federal Budget 2022)
‘Bank of Canada and MIT ink digital currency link-up’ – our news story (18 March 2022) on the start of the central bank’s MIT collaboration
Global Government Fintech’s sister title Global Government Forum runs an annual ‘AccelerateGOV’ conference in Canada, co-hosted by the Government of Canada. The event serves public service leaders and managers with an interest in transformation – exploring in panel discussions and audience Q&As how staff from different professions can best promote and deliver transformed public services. The next event will be on 3 October 2023.
