Canada has elected to suspend its central bank digital currency (CBDC) initiative, redirecting its attention from creating a digital dollar project.
The Bank of Canada announced this transition following years of research into the potential digital version of the national currency. The initiative, which commenced in 2017, was initially initiated in response to Canadians’ rapid digitalization and evolving payment habits.
The Bank of Canada received nearly 90,000 responses to a public consultation paper in late 2023. Most of these responses indicated privacy concerns regarding a prospective CBDC.
The results of a subsequent online survey indicated that 87% of participants would never use a digital Canadian dollar, and 92% would not prefer it over existing payment methods.
The central bank’s decision to reduce its retail CBDC work has caught many by surprise, as there is a growing global interest in CBDCs. As of September 2024, 134 countries and currency unions, which account for 98% of the global GDP, are investigating central bank-issued digital currencies, according to the Atlantic Council’s CBDC tracker.
The Bank of Canada reiterated its commitment to “continue to monitor global retail CBDC developments and publish some related research” despite its departure from retail CBDC development. In addition, the bank declared that “there will be additional opportunities for Canadians to contribute their thoughts on a potential digital dollar in the future.”
The bank’s official statement stated that it is “focusing on broader payments” research and “scaling down” its retail CBDC work.
Nevertheless, it is not entirely obvious whether this implies that the concept of a Canadian digital dollar has been entirely abandoned. The bank expressed that the research conducted thus far would be “invaluable” if Canadians ultimately determine that they require or desire a digital Canadian dollar.
The public consultation process prompted significant concerns regarding cybersecurity threats and privacy concerns. The Bank of Canada’s capacity to safeguard digital currency consumers from cyber attacks was questioned by 87% of the participants.
The central bank had consistently maintained that the digital Canadian dollar was not intended to replace paper notes, but rather to facilitate online purchases and fund transfers.
Other nations are advancing their CBDC initiatives, while Canada is taking a step back. The Bahamas, Jamaica, and Nigeria are the three nations that have thoroughly implemented CBDCs and are currently expanding their use.
As of June 2024, China’s digital yuan pilot is the largest in the world, with transactions tallying 7 trillion yuan (approximately $986 billion), nearly quadrupling the amount from the previous year.
According to industry observers, the surge in interest in CBDC initiatives may be attributed to geopolitical events, including Russia’s invasion of Ukraine. There are 13 cross-border CBDC initiatives in progress, including Project mBridge, which connects institutions in China, Thailand, and other countries.
The global trend starkly contrasts Canada’s decision to suspend its CBDC project. Nevertheless, the Bank of Canada’s transition to a more comprehensive approach to payments system research and policy development indicates that the nation continues to monitor the changing digital currency landscape.
The bank’s recent stance is consistent with the ongoing discourse regarding CBDCs in other nations. For instance, in the United States, CBDC has emerged as a presidential election issue even though Federal Reserve Chair Jerome Powell has stated that the United States is not in the process of recommending or adopting a CBDC in any capacity.
