While a “digital loonie” is potentially on the horizon for Canada’s central bank, Bitcoin very much is not, according to Bank of Canada’s Deputy Governor Timothy Lane.
In a speech delivered on February 10th, Lane addressed the concept of a central bank digital currency (CBDC) for the country, the preparation for which has been accelerated by last year’s pandemic and its accompanying shift towards digital payments.
Although Lane acknowledged these developments, he stressed that Bank of Canada has not changed its opinion that a CBDC is not immediately necessary in Canada, although it has been working on the idea of a digital Canadian dollar as a contingency plan. One indicator of whether a CBDC could be beneficial may be a decline in the acceptance of cash: while that can already be observed across the country, “it’s too early to tell whether these trends will continue beyond the pandemic, but we are watching closely.”
But it is not only the digital Canadian dollar that is seeing a discussion spurred on by COVID-19: some cryptocurrencies issued by the private sector could experience ” a boost from the acceleration of digitalization in the midst of the pandemic,” Lane mused. And he doesn’t appear to think of that as a good thing:
“Cryptocurrencies such as bitcoin do not have a plausible claim to become the money of the future,” he stated, calling them “deeply flawed as methods of payment” due to their “costly verification methods” and “highly unsustainable purchasing power.”
The only use case Lane attributes to Bitcoin is that of “illicit transactions like money laundering, where anonymity trumps all other features.”
Lane described Bitcoin’s recent price rally to new all-time highs just shy of $50,000 as a “speculative mania” driven by single tweets from high-profile personalities—possibly referring to Elon Musk who recently embraced Bitcoin, and whose company Tesla purchase $1.5 billion worth of it this week.
Stablecoins, on the other hand, have higher potential to become widely adopted, “although none is near that point yet,” Lane said. For privately issued stablecoins to become widely used, he believes further examination “at a global level” is needed, as well as better insight into whether Canadians would actually want to use stablecoins when alternatives such as credit cards and cash are available.