OTTAWA: The COVID-19 pandemic has added urgency to the Bank of Canada's development of a digital currency and a decision could come sooner than previously thought, a senior policymaker said on Wednesday (Feb 10), though he noted that a launch was not a "foregone conclusion".
Bank of Canada deputy governor Tim Lane, speaking to a digital intelligence audience, also noted that while the pandemic has boosted cryptocurrencies like Bitcoin, recent prices spikes look like "speculative mania" and the offerings remain implausible as the currency of the future.
"For several years, the Bank of Canada has been analysing which circumstances might lead Canada to decide to issue a digital currency. The pandemic may bring us to a decision point sooner than we had anticipated," said Lane, pointing to growing cash hesitancy in Canada and the rise of cryptocurrencies.
While the pandemic had accelerated the central bank's work to prepare for the potential launch a digital dollar, that day has not yet arrived, said Lane.
"In a speech ... a year ago, I gave our preliminary view: we did not see a need for a central bank digital currency at that time," said Lane. "A year later, our view remains unchanged: a digital currency is by no means a foregone conclusion."
Lane noted that while Canadians have become more hesitant about using cash amid the pandemic, it is unclear if that trend will continue post-pandemic.
About Bitcoin, he said cryptocurrencies remain "deeply flawed" as payment methods, adding they do not have "a plausible claim" to become the money of the future.
"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," he said.
Bitcoin spiked earlier this week after billionaire Elon Musk's Tesla Inc revealed it had invested in the cryptocurrency.
Lane noted that while there is more potential in so-called stablecoins, backed by safe assets, serious data privacy concerns remain, especially if offered by technology companies that already mine customer data for profit.
"If that business model were used as a foundation for the dominant method of payment in the economy, the issuer would gain control over an enormous range of data - bringing with it overwhelming market power," he said. "In effect, a technology company could become the gatekeeper of the entire economy."
Facebook has announced plans to launch a stablecoin, prompting backlash from global political leaders who say digital currencies must be regulated.
Canada is ahead of many other nations on developing its own digital currency, but lags others like China, which has already launched pilot runs of its offering.