Canada Pauses Digital Dollar Project as Global CBDC Development Surges - Blockonomi
by Oliver Dale · BlockonomiTLDR:
- Canada’s central bank is shifting focus away from retail CBDC development
- The bank is now prioritizing broader payments system research and policy
- Public consultation revealed privacy concerns and low interest in a digital Canadian dollar
- Canada’s move contrasts with growing global CBDC momentum
- China’s digital yuan pilot leads with transactions totaling about $986 billion as of June 2024
Canada has decided to pause its central bank digital currency (CBDC) project, shifting focus away from developing a retail digital Canadian dollar.
The Bank of Canada announced this change after years of research into a potential digital version of the national currency. The project, which began in 2017, was initially a response to rapid digitalization and changing payment habits among Canadians.
In late 2023, the Bank of Canada received nearly 90,000 responses to a public consultation paper. Most of these responses reflected privacy concerns about a potential CBDC.
A subsequent online survey revealed that 87% of participants said they would never use a digital Canadian dollar, while 92% stated they would not prefer it over existing payment methods under any circumstances.
The central bank’s decision to scale down its retail CBDC work comes as a surprise to many, given the growing global interest in CBDCs. According to the Atlantic Council’s CBDC tracker, as of September 2024, 134 countries and currency unions, representing 98% of global GDP, are exploring central bank-issued digital currencies.
Despite moving away from retail CBDC development, the Bank of Canada emphasized that it would “continue to monitor global retail CBDC developments and publish some related research.” The bank also stated that there would be “further opportunities for Canadians to provide input on a potential digital dollar” in the future.
The bank’s official statement indicated that it is “scaling down” its retail CBDC work and “shifting its focus to broader payments” research.
However, it’s not entirely clear whether this means the idea of a Canadian digital dollar has been completely shelved. The bank noted that all the research done so far would be “invaluable if, at some point in the future, Canadians … decide they want or need a digital Canadian dollar.”
Cybersecurity threats and privacy issues were major concerns raised during the public consultation process. 87% of participants expressed doubts about the Bank of Canada’s ability to protect digital currency users against cyber attacks.
The central bank had consistently maintained that the digital Canadian dollar would not replace paper notes but was intended to simplify online purchases and fund transfers.
While Canada takes a step back, other countries are pushing forward with their CBDC initiatives. Three nations – the Bahamas, Jamaica, and Nigeria – have fully launched CBDCs and are now working to expand their use. China’s digital yuan pilot remains the largest globally, with transactions reportedly totaling 7 trillion yuan (approximately $986 billion) as of June 2024, nearly quadrupling last year’s total.
Industry watchers suggest that geopolitical events, such as Russia’s invasion of Ukraine, have contributed to increased interest in CBDC projects. Currently, there are 13 cross-border CBDC initiatives in progress, including Project mBridge, which links banks in China, Thailand, and other nations.
Canada’s decision to pause its CBDC project contrasts with the global trend. However, the Bank of Canada’s shift in focus towards broader payments system research and policy development suggests that the country is still keeping an eye on the evolving digital currency landscape.
The bank’s latest position aligns with the ongoing debate over CBDCs in other countries. In the United States, for example, CBDC has become a presidential election issue, despite Federal Reserve Chair Jerome Powell stating that the U.S. is nowhere near recommending or adopting a CBDC in any form.