As cryptocurrencies grow in popularity, the CD Howe Institute says the Bank of Canada should issue a digital dollar to take advantage of advances in payment technology.
In this case, the digital currency will be linked to Canadian dollars and could be converted to cash.
“Allowing the Bank of Canada to issue digital Canadian dollars could play an important role in facilitating the emergence of cryptocurrencies in Canada while helping to keep the Canadian dollar as the country’s most important unit of account,” said Mark Zelmer, co-author of the report and former deputy inspector. for financial institutions OSFI.
“There would be a direct digital bridge between privately issued cryptocurrencies and a digital Canadian dollar issued by the Bank of Canada.”
The CD Howe Institute says the digital currency needs to be in token form with decentralized transaction settlement technology. It should also be well-designed and regulated based on business behaviors, competitive, operational, privacy and regulatory perspectives.
According to the report, the issuance of a digital currency could encourage the private sector to introduce Canadian dollar-linked stack coins by enabling convertibility to take place digitally without having to rely on physical banknotes.
The think tank says that the stablecoin platform must have access to central bank liquidity facilities to ensure smooth transactions and deposit insurance to reduce the risk of running.
Bank of Canada explores digital currency
Bank of Canada Deputy Governor Timothy Lane earlier this year was critical of private-sector cryptocurrencies, calling them “deeply flawed as payment methods.”
“Only a central bank can guarantee universal access, privacy and complete security for a digital currency, with public interest being a top priority,” Lane said in a February speech.
But he said he was open to something like what the CD Howe Institute recommends.
“The bank will continue to explore the possibilities of a digital currency that would be an electronic version of the banknotes that Canadians trust and trust,” Lane said.
Jessy Bains is a Senior Reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.