The Bank of Canada has accelerated work on a central bank digital currency (CBDC) in response to Covid-19 and its impact on cash usage, says a senior official who nevertheless cautions that a digital loonie is still not a "forgone conclusion".
A year ago, deputy governor Timothy Lane stated that the central bank had no plans to issue its own digital currency at that time, but said this could change if cash usage dropped off significantly or private options such as bitcoin or the Facebook-backed Diem gain widespread adoption.
In a speech this week, Lane says that the bank's view remains unchanged. However, the pandemic has had an impact on cash usage, with both shoppers and merchants more hesitant to use paper money.
With Covid-19 accelerating the transition to a digital economy, "our work to prepare for the day when Canada might want to launch a digital loonie—backed by the Bank—has also accelerated," says Lane.
The deputy governor is less concerned with private e digital currencies, saying that the likes of bitcoin "do not have a plausible claim to become the money of the future".
He continues: "They [cryptocurrencies] are deeply flawed as methods of payment—except for illicit transactions like money laundering, where anonymity trumps all other features—because they rely on costly verification methods and their purchasing power is wildly unstable."
In contrast, stablecoins could see widespread adoption for payments but none "is near that point yet".