CALGARY — The Bank of Canada is looking at the key questions around the design of a digital currency and the issues surrounding such an idea, a senior Bank of Canada official said Monday.
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 such a 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 said the central bank uses the term cryptoassets to describe cryptocurrencies because they do not do a good job of performing the basic functions of money. The value of bitcoin has swung wildly with it topping US$20,000 last year and now trading around US$6,000.
However, Lane said, as cryptocurrencies evolve they may touch on the central bank’s core functions including monetary policy, financial stability, payments and currency.
He said the Bank of Canada is not responsible for regulating cryptocurrencies, but it has been examining the potential impact on the stability of the financial system.
Earlier this year, Bank of Canada senior deputy governor Carolyn Wilkins called on authorities to work toward a set of globally aligned policies governing cryptocurrencies. She said it was important to have a strategy on cryptoassets that was as consistent as possible across countries.
Lane said that differences in regulations around the world, together with the incompleteness of regulation in many jurisdictions leaves open room for regulatory arbitrage.
“Differences in the regulatory treatment of these products for controlling money laundering and terrorist financing are a particularly pressing concern,” he said.
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.”
The Canadian Press
Connect with us Facebook
How consumer tech is changing the way developers build condominiums
New tax break rules for ‘opportunity zone’ investors
Annual pace of inflation slows to 2.2 per cent in September: Statistics Canada
Greens broker changes to B.C. government’s new speculation tax, pledge support
Greens demand change of B.C. government’s new speculation tax
Half of Canadian homeowners say cannabis use will hurt property values: poll
New rules make mortgages easier for self employed
Debt burdening Canadians despite gains in financial health
B.C. limits rent increases but tenants’ group wants more protections
A look at numbers for Smiths Falls, Ont., home of a Canadian cannabis giant
- How consumer tech is changing the way developers build condominiums
- New tax break rules for ‘opportunity zone’ investors
- Annual pace of inflation slows to 2.2 per cent in September: Statistics Canada
- Greens broker changes to B.C. government’s new speculation tax, pledge support
- Greens demand change of B.C. government’s new speculation tax
5 Mortgage Secrets11 months ago
5 SECRETS THE BANK DOESN’T WANT YOU TO KNOW ABOUT YOUR MORTGAGE
Buying a Home4 months ago
6 Reasons to be Pre-Approved for a Mortgage Early
Finance3 months ago
When is a Variable Rate Mortgage the Smart Choice?
Home Page6 months ago
Central bank raises key metric used to determine mortgage eligibility
Buying a Home6 months ago
3 Documents You Didn’t Know You Need for Your Mortgage Approval
5 Mortgage Secrets8 months ago
THE POSTED RATE SCAM Mortgage Secret 2 of 5
Buying a Home5 months ago
5 Steps to a Guaranteed Mortgage Approval
5 Mortgage Secrets8 months ago
THE PENALTY COVER UP Mortgage Secret 3 of 5