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The Bank of Canada is exploring the option of launching a digital currency, which it hopes will help it fight the threat of cryptocurrencies, in addition to allowing the bank more information on how the public spends its money.
According to an internal Bank of Canada presentation, the proprietary digital coin will be made widely available, and while it will initially coexist with traditional fiat currencies, the bank hopes that it will replace conventional money over time.
The presentation was titled: “Central Bank Money: The Next Generation”. It was created by Stephen Murchison, who is an advisor to Governor Stephen Poloz. Murchison was given the responsibility to lead the 2 year research project on digital currency and its feasibility in bank operations. It offers a very detailed insight towards the bank’s thought towards digital currency.
The presentation has come at a time when concerns have arisen around the world over the effects of adopting digital money. Central bankers and regulators from around the world are meeting in Washington D.C. for the annual World Bank/International Monetary Fund meetings, which will include a discussion on the future of finance and big tech.
Multiple Benefits to Bank Based Digital Currency
At present Facebook’s Libra is losing investors and is facing international scrutiny, while China is developing a digital currency of its own. The Bank of Canada presentation emphasizes on the need for innovation to keep up with the competition. It also states that a proprietary digital currency asset, which is backed by the central bank will provide additional benefits such as superior security and convenience through wireless capabilities.
On the other hand, while it endorses the increased strength of the payment system through increased payment methods, the presentation also states that the new digital currency increases the risk to low cost funding and stability for banks and deposits.
The digital currency could possibly come with an option to pay interest on bank account balance and also details on spending habits of people using the cash, which could be shared with tax authorities or the police in case of discrepancies.