Global: Bank of Canada Paper Raises Doubts About CBDC’s Value

A Bank of Canada discussion paper has raised questions about the practicality of introducing a central bank digital currency (CBDC) to address unmet payment needs in a cashless environment.

Over the past few years, Canada’s central bank has been researching a digital version of its currency, exploring its design features and relevance for various payment scenarios.

However, the recent paper from the bank’s researchers points out that most Canadians already have access to a range of payment methods, which would likely remain the case in a cashless society.

The statistics show that 98% of Canadian adults possess a bank account, 87% own a credit card, and internet access is widespread.

The paper acknowledges that there is still a subset of people who might encounter difficulties if cash were no longer widely accepted. Nevertheless, for a payment-focused CBDC to effectively address this concern, it would need to be adopted by the majority, including those who already have access to other means of payment. If these individuals do not embrace the digital currency, achieving widespread merchant acceptance would also be unlikely.

The paper concludes that “the minority of consumers with unmet payment needs will only be able to benefit from a CBDC if the majority of consumers experience material benefits and therefore drive its use.”