There is no doubt that cryptocurrencies like Bitcoin are disrupting the finance and investment sphere not just in Canada but in the world. This trend has spurred talks amongst the central banks across the globe, debating on whether these currencies should be banned or regulated.
For its part, the Bank of Canada (BoC) is mulling over jumping aboard the cryptocurrency train. In a staff discussion paper, the bank explores the implications of issuing a publicly-available cryptocurrency or a central bank digital currency (CBCD)
“CBDC, at the most basic level, is simply monetary value stored electronically that represents a liability of the central bank and can be used to make payments,” BoC said in the paper.
The paper puts into light the “considerable impacts” on the financial ecosystem and potentially the wider economy of cryptocurrencies and the underlying blockchain technology.
“The focus here is on the economics of CBDC—in particular, on the motivations for issuing CBDC and its economic implications. Much of the paper is concerned with projecting the plausible or likely outcomes of specific CBDC designs; of course, this is subject to considerable uncertainty given the complexity and interconnected nature of possible effects,” BoC said.
It added, “We also assume that the technological means to issue and use CBDC would be effective, and acceptable to the central bank. Thus, the analysis in this paper is not technology-specific.” Read the rest of the BoC paper here.