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Bank Of Canada Possibly Planning To Rush Digital Currency Plans

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IT was back in February of 2020 when Timothy Lane, the Bank of Canada’s Deputy Governor, boldly proclaimed that the country did not need to enact a central bank digital currency (CBDC). However, Lane did say that the Bank of Canada will develop one regardless, just in case it needs it in the future.

Things Are Closer Than They Appear

The tables have seemingly turned, by now, and Lane is suggesting that this need to have a CBDC is not only there, but coming sooner than the Canadian central bank had anticipated.

Lane, having spoken at a FinTech conference back in February, stated that the Bank of Canada doesn’t know what the future holds. Even so, the bank is eager to move forward in working out what their country’s CBDC would look like. Alongside this, should the Bank of Canada decide to issue it, the central bank also needs to know how to manage it.

Canada Becoming too Cashless To Ignore

That conference had Lane outline two key scenarios in which Canada’s government could be prompted to issue out the CBDC they’ve been working on. The first of these conditions is cryptocurrencies becoming simply too popular, which would create privacy concerns or otherwise threaten the Canadian Dollar’s supremacy in its own soil. The second is regarding whether or not Canada as a society completely phases out cash usage for a new digital economy, which would create its own economic disparity.

After agreeing to ban Facebook’s Libra cryptocurrency, Germany is now doubling down on its plan to stop parallel currencies. Germans recently passed a strategy that touches blockchain and cryptocurrency comprehensively and vows against parallel financial systems initiated by corporations. Berlin buckles up for the fight German chancellor Angela Merkel and her cabinet passed a comprehensive blockchain strategy on Wednesday. The government believes that the economy should make use of digital transformations but must also be aware of the risks arising out of these technologies. Finance minister Olaf Scholz said that blockchain technology could become the basis for the internet of the future. He also said, “We want to be at the forefront and further strengthen Germany as a leading technology location. At the same time, we must protect consumers and state sovereignty. A core element of state sovereignty is the issuing of a currency, we will not leave this task to private companies.” The government also wants to work in close cooperation with its European and global peers to ensure that stablecoins don’t end up becoming alternative currencies. Berlin will also focus on its dialogue with German central bank, Bundesbank, to talk about a digitized version of the central bank currency and the possible risks of such coins. Germany’s move is a threat to Facebook The German government has a holistic plan to tackle growing issues with digital currencies. However, it plans on introducing electronic bonds in the domestic market that will be issued on blockchains. The government, alongside France, has already pledged to ban Libra. The French authorities have also adopted a highly critical stance on Facebook’s Libra, and they are also looking forward to launching a digitized legal tender of their own. Meanwhile, the European Central Bank is also looking forward to the creation of a public digital currency, backed by central banks, that would eliminate the need for Libra. Francois Villeroy de Galhau, a member of the ECB board, said that Libra highlighted the gaps in European regulations and said that the company would be treated with a tough approach. This would create further regulatory and operational hurdles for the American social media giant that aims to leverage its 2+ billion userbase to launch a new digital currency. Libra will be a stablecoin backed by government securities, but with European countries launching their own government-backed stablecoins, it will face stiff competition in the market.

It seems that the latter condition is becoming more and more prevalent, according to the latest interview with Lane. At the Centre for International Governance Innovation, a Canadian think tank, he reminded the public of those two scenarios he made back in February.

Indeed, he highlighted that the Bank of Canada had seen some interesting developments in the past nine months, indicating that some of those conditions are coming to fruition far sooner than the central bank anticipated.

Being Prepared In Any Event

He highlighted how the pandemic is making Canadian citizens less reliant on cash, but Lane remains unsure whether this development will linger after the pandemic was dealt with.

While this comment is no definitive declaration, it makes it clear that the Bank of Canada is taking a harder look at its plans for a CBDC. Indeed, Lane explained that things are moving quicker than the bank had anticipated.

While the bank isn’t sure if these trends will continue after the pandemic, Lane made it clear that it wants to be ready if it doesn’t, readying its CBDC earlier than it had planned.

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