Research shows that Canadian CBDC can promote domestic digital innovation

A study Released Banque du Canada, the Central Bank of Canada, pointed out that the country can benefit from its own central bank digital currency (CBDC) for many favorable reasons.

The document lists two situations that may cause a bank to issue a CBDC on a future date. One situation is if citizens no longer use cash extensively in the country for unspecified reasons. Another possibility is the widespread adoption of public or private digital currencies that threaten the sovereignty of Canada’s existing central currency.

Participants believe that neither scenario will be a possible outcome in the near future, but noted that the country’s interest in stablecoin regulation and adoption has increased in recent months. Even so, the study found that cryptocurrencies and stablecoins used as payment methods in Canada are currently “new to a small number of enthusiasts.”

related The Bank of Canada believes that there is no strong reason for the digital dollar-currently

The document acknowledges the many potential benefits inherent in the use of CBDC. In other words, the technology can have the same level of security as cash, while allowing payment systems for online transactions and peer-to-peer transfers. Compared with payment methods such as credit or debit cards, CBDC does not necessarily charge retailers the same type of transaction fees:

“CBDC may be a simpler competition policy tool because it will provide customers and merchants with another low-cost payment tool. This will help reduce the exchange fees charged by existing networks.”

It is also a point of interest that CBDC may support smart contracts because they can increase the speed and accuracy of execution by automating operations that are usually done manually. Participants believe that smart contracts will bring some risks to users, because smart contract developers may be independent of the bank’s CBDC platform. If the execution of the contract does not follow the agreed terms, whether intentionally or unintentionally, this may cause problems. They suggested that before deciding to implement it, further research on smart contracts and the programmability of Canada’s CBDC is needed.

There may be many benefits to creating a CBDC for Canada. The study explained:

“Overall, we believe that CBDC may be beneficial and may be necessary to ensure a competitive and vibrant digital economy.”

Canada is not the only country considering implementing a CBDC.At the same time last week Speaking Federal Reserve Chairman Jerome Powell told the House of Representatives that if there is a digital dollar, there is no need for stablecoins or cryptocurrencies. A paper focusing on the benefits and risks of digital dollars is expected to be published sometime in September.