According to the Financial Post, The Bank of Canada is looking into questions regarding digital currency and the issues surrounding the matter, a Senior Bank of Canada official said recently.
However, Deputy Governor Timothy Lane told a University of Calgary audience that unless the risks associated with a central bank digital currency can be managed through appropriate design, the bank would not recommend issuing a digital currency.
“The design of a CBDC has important implications for its risk and benefits,” Lane said according to the prepared text of his speech released in Ottawa.
“Some major reasons for caution about a central bank digital currency are concerns that it could become a vehicle for illicit transactions or that it could have significant negative implications for financial intermediation.”
Lane continued to say that the central bank uses the term cryptoassets to describe cryptocurrencies because they do not do a good job of performing the basic functions of a money, citing the wild volatile swing when Bitcoin swung to nearly USD 20,000.
However, Lane said, as cryptocurrencies evolve they may eventually touch upon the central bank’s core functions such as monetary policy, financial stability, payments and currency.
He also said that the Bank of Canada is not responsible for regulating cryptocurrencies, but is still exploring options about its impact on the stability of the financial system.
Lane noted that they do not yet pose financial stability risks, but things are evolving rapidly as cryptoassets grow in size, complexity and interconnectedness.
“As the underlying technologies and the design of crypto products evolve, we need to be ready to reassess how they might affect financial stability,” he said, “Some potential aspects include the integrity of payment systems, bank business models, and the exposures of financial institutions and infrastructures.”