Bank of Canada Official Censures Cryptos, Hails CBDCs

With several countries across the world pushing for Central Bank Digital Currencies (CBDCs), several policymakers have lent their thoughts on the state of things. In Canada, however, while decisions regarding a state-backed digital asset are ongoing, a CBDC doesn’t appear to be a foregone conclusion.

Speculative Mania Grips the World

Timothy Lane, a Deputy Governor at the Bank of Canada, has detailed the state of discussions about a CBDC. Lane said that the Bank of Canada had become more aware of recent trends, with the coronavirus pushing the agency fast towards a prospective asset.

The policymaker also appeared to be less of a fan of traditional cryptocurrencies, explaining that the assets had become too speculative. 

“The recent spike in their prices looks less like a trend and more like a speculative mania — an atmosphere in which one high-profile tweet is enough to trigger a sudden jump in price,” Lane said.

His statement appeared to have been a reference to recent Twitter activity from Tesla CEO Elon Musk and other notable people who have been getting more enamored with cryptocurrencies. Echoing Musk’s newfound love for crypto, Tesla recently announced the purchase of $1.5 billion in Bitcoin, sending the asset’s price to a new all-time high.

Several people have echoed concerns over Musk’s particular penchant for making crypto-related tweets. Speaking with the U.K. Telegraph, Doug Davidson, an attorney and former branch chief at the Securities and Exchange Commission (SEC), explained that it wouldn’t be surprising if the agency decided to pay more attention to the CEO’s tweets.

Vitor Constâncio, a former executive at the European Central Bank, also expressed the same sentiment. In a tweet, he expressed suspicion about the timing of Tesla’s investment and the events that preceded – including Musk’s constant promotion of the leading cryptocurrency.

CBDCs Forging Ahead Regardless

As for Lane, while cryptocurrencies themselves appear to be slightly shady, there is a genuine need for CBDCs. In his statement, the policymaker said that central banks would need to be the custodians of any currency that is to be used as nationwide exchange media.

Lane also criticized private stablecoins, explaining that the recent revelations about companies and their use of customer data made them unfit to manage citizens’ financial information.

The deputy bank chief will most likely be a part of the Canadian delegation at the G7 summit, where it has been confirmed that CCBDCs and digital asset taxation will be top topics of discussion.