Bank of Canada should issue digital currency: CD Howe Institute

Bank of Canada says it’s looking into digital currency (REUTERS / Blair Gable)

As cryptocurrencies gain popularity, the CD Howe Institute said the Bank of Canada should issue a digital dollar to take advantage of advances in payments technology.

The think tank says digital currency should be a stable coin, in a new report. Unlike other cryptocurrencies like bitcoin, stablecoins are tied to fiat currency or conventional assets.

In this case, the digital currency would be linked to the Canadian dollar and could be converted into cash.

“The fact that the Bank of Canada issues digital Canadian dollars could play an important role in facilitating the emergence of cryptocurrencies in Canada while helping to retain the Canadian dollar as the country’s primary unit of account,” said Mark Zelmer , co-author of the report and former Deputy Superintendent of Financial Institutions OSFI.

“There would be a direct digital bridge between privately issued cryptocurrencies and a digital Canadian dollar issued by the Bank of Canada.”

The CD Howe Institute says digital currency should be in token form, with decentralized technology for settling transactions. It must also be well designed and regulated from the point of view of business conduct, competition, operation, confidentiality and prudence.

According to the report, issuing a digital currency could encourage the private sector to introduce stablecoins linked to the Canadian dollar by allowing convertibility to take place digitally without having to rely on physical banknotes.

The think tank says the stablecoin platform should have access to central bank liquidity facilities to ensure smooth transactions and deposit insurance to mitigate the risk of leaks.

Bank of Canada Explores Digital Currency

Bank of Canada Deputy Governor Timothy Lane criticized private sector cryptocurrencies earlier this year, calling them “deeply flawed as a method of payment.”

“Only a central bank can guarantee universal access, privacy and full security of a digital currency, with the public interest being the top priority,” Lane said in a speech in February.

But he said he was open to something like what the CD Howe Institute recommends.

“The Bank will continue to explore the possibilities of a digital currency that would be an electronic version of the banknotes that Canadians trust and rely on,” Lane said.

Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on twitter @jessysbains.

Download the Yahoo Finance app, available for Apple and Android.



Source link

Comments are closed.