The Bank Of Canada Could Launch A New 'Digital Dollar' — Here's Why & What Would Change
Would you say goodbye to plastic bank cards and cash?💰
A hand holds Canadian coins and banknotes.
How would you feel about swapping your cash or plastic cards for a digital dollar? Well, that might just be the future.
Earlier this week, the Bank of Canada announced that it has been exploring the possibility of issuing a digital version of the Canadian dollar – which it says is also known as a central bank digital currency (CBDC).
According to Canada's central bank, a digital Canadian dollar would essentially be an electronic representation of the physical money you carry in your wallet.
Like traditional cash or bank cards, it could be used to purchase goods and services. An advantage, according to the BOC, would be its versatility in online transactions and how it would enable the transfer of funds among individuals, such as family and friends.
The new form of money would be issued by the central bank, who would be responsible for ensuring it offers the same benefits as traditional cash. The bank says it would be safe, accessible to everyone and private.
Canada's new digital dollar would not be considered cryptocurrency, though. The BOC explains that the value of cryptocurrencies, like Bitcoin, can fluctuate significantly.
A digital Canadian dollar, on the other hand, would not change in value as it's simply another version of the money in your wallet – so it would be backed by the central bank in the same manner as the loonie or toonie in your pocket.
The BOC explains, "$10 in digital Canadian dollars would always have the same value as a $10 bank note."
What's more, cryptocurrencies often involve high transaction fees, lengthy processing times, and limited recourse in case of issues. This is why cryptocurrencies are generally used as investment assets rather than for everyday transactions.
When it comes to the digital dollar, the bank says, "Our goal is to design a digital Canadian dollar that would be fast and low cost to use, just like cash is now."
Explaining its reasons for exploring a new currency, the Bank of Canada said, "As Canada’s central bank, we have a responsibility to ensure everyone always has the opportunity to take part in the economy. And we need to prepare for whatever the future holds."
A YouTube video released by the bank highlights that a digital currency could eliminate the need for Canadians to carry multiple bills and loose change. The convenience of a digital currency could also enable shoppers to simplify their transactions, both in person and online.
As for how you would use it, the bank says it would be kept either securely on your phone or on a physical card, or even on another electronic device. What's more, the currency could be used without an internet connection – saving any headaches in the event of a network outage.
Those happy to continue using existing plastic cards and cash don't have too much to worry about right now, though. The bank says it doesn't see an immediate need to transition to digital currency, although it admits Canada must "get ready" to adapt to ensure a smooth transition if and when the demand for virtual money arises.
The decision whether to move forward with a new form of currency won't be up to the central bank, though. Instead, parliament and the government of Canada will make the final call.
However, leading up to that decision, the Bank of Canada is encouraging Canadians to share their opinion on virtual currencies, noting that "your input will help us make decisions about the design of a digital Canadian dollar."
In the meantime, the bank says cash remains a safe and accessible way of making payments and, even in the event of a digital currency launch, cash would remain available.
"We will continue to supply bank notes as long as Canadians want to use them," the bank promised.
This article's cover image was used for illustrative purposes only.