Bank of Canada, the Canadian central bank, is exploring the possibility of launching a digital currency that would replace cash and track how people spend their money.
The aim of the proposed currency would be to mitigate the “direct threat” posed by cryptocurrencies to the economic sovereignty of governments and central banks, an issue that has featured prominently in the headlines recently amidst intense regulatory pushback on Facebook’s proposed coin, Libra. The proposal was pitched to Stephen Poloz, Governor of the Bank of Canada, and its board of directors in a presentation entitled “Central Bank Money: The Next Generation.”
The presentation, which was a culmination of two years of research, described cryptocurrencies as “a direct threat to our ability to implement monetary policy and lender of last resort (LOLR) role.” It also argued for the benefits of a Bank of Canada controlled digital currency, which includes the convenience and security of wireless payments as well as the ability to help authorities collect more information on spenders. “Personal details not shared with the payee, but could be shared with police or tax authorities,” the presentation reads.
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While Bank of Canada has not made any official decision on whether to launch these proposals, the consideration of the topic comes at a time when Libra is being challenged on an almost daily basis from regulators and lawmakers in both Europe and North America. Facebook’s CEO Mark Zuckerberg will testify before congress next week in defense of the proposed digital coin, and he faces an uphill battle given that the chair of the congressional committee, Maxine Waters, drafted the “Keep Big Tech Out of Finance Act.”
While some politicians are staunchly opposed to Libra, such as French Finance Minister Bruno Le Maire, who described it as “unacceptable” and promised to block its development in Europe, Bank of Canada appears to be taking a more measured approach. This is similar to other lawmakers in Europe, like Executive Vice President of the European Commission Valdis Dombrovskis, who argued for a common approach to regulating cryptocurrencies.
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