BoC deputy: pandemic means central banks must ‘move faster’ on digital currency plans
BY Jordan Press, the Canadian Press | October 15, 2020
Pandemic-related shifts in how people shop, sending more people into cyberspace than a physical space, means central banks must speed up work on creating their own digital currencies, says a top Bank of Canada official.
The coronavirus has meant more people are shopping online, and foot traffic for brick-and-mortar storefronts hasn’t caught up to pre-pandemic levels for many small and medium-sized businesses.
Bank of Canada deputy governor Timothy Lane said that shift in spending habits coupled with the speed of technological developments has narrowed the window to deliver a digital currency issued by the central bank.
“This is all looking a lot more urgent because of the speed with which technology is evolving and particularly, I think, with COVID we’ve seen an acceleration of the shift of activities online,” Lane said during the webinar.
“That suggests that if we want to be ready to develop any kind of digital central bank product, we need to move faster than we thought was going to be necessary.”
The comments from an online panel on Wednesday are a shift from late February, just before the pandemic struck, when Lane suggested the timeline to create a digital currency was long.
He suggested on Wednesday that many central banks still believe there isn’t a compelling case for them to immediately issue a central bank-backed digital currency, but circumstances are changing rapidly.
Just this week, the Financial Stability Board, an international group that counts the Bank of Canada and the federal Finance Department as members, issued recommendations on how authorities should regulate “stablecoins” backed by currency holdings.
“The world is changing so quickly that if we want to have something that’s actually viable, and could be launched in a suitable timeframe, we need to be moving pretty quickly and deliberately to develop something,” Lane said during the panel hosted by the Reinventing Bretton Woods Committee and the Chamber of Digital Commerce.
The Bank of Canada has started work on its own digital currency should others become widely used in Canada and erode the central bank’s ability to manage monetary policy, but earlier this year officials believed they had a long timeline to create one before the Canadian dollar wasn’t used for most transactions.
The work builds on six-plus years of research into the growth of volatile digital currencies like Bitcoin and stablecoins that maintain a stable value, as the name implies. Among the new batch of stablecoins getting attention is Facebook’s Libra, which Lane is scheduled to address during a panel appearance Thursday.
As it stands, the Bank of Canada can design, issue and distribute the bills Canadians hand over when buying a cup of coffee, but it doesn’t have the legislative authority from Parliament to offer a digital currency.
But over the course of the pandemic, the central bank has watched as some businesses have stopped accepting cash over health concerns, much to the Bank of Canada’s dismay.
If cash stops being widely accepted, there will be people excluded from the economy, Lane said Wednesday, such as disadvantaged people who pay with paper and not plastic. There are also wider privacy issues that need to addressed with a digital currency, he said, not to mention cross-border concerns.
“If one country introduces a central bank digital currency, then that immediately creates the potential for other countries to be affected . . . and that can create a whole other set of issues.”
Lane said the bank would have to hold widespread consultations to understand what Canadians would want in a digital currency before the central bank could issue one.