The Bank of Canada is considering issuing its own digital currency in competition with bitcoin (BTC), seven years after the bank quietly killed a similar initiative by the Royal Canadian Mint, according to Blacklock’s Reporter..“A central bank digital currency could be necessary in the future to ensure a competitive digital economy,” researchers wrote in a report, The Positive Case For A CBDC..The bank called BTC “a novelty for a small number of enthusiasts in Canada” – fewer than 10% of Canadians own it – but warned if widely adopted it would be “out of reach for Canadian regulators.”.“Cash remains widely accepted,” wrote researchers, who added: “The long term, however, is less clear because if the trend towards less acceptance continues the function of cash as a medium of exchange will eventually erode, likely leading consumers to look for more convenient stores of value.”.“It is important to highlight the bank is committed to supplying cash for as long as Canadians demand it,” said Positive Case..“Therefore, if most Canadians moved away from cash it would be due to the choice of consumers.”.The bank complained credit cards “come at the expense of high fees for retailers which they eventually pass onto customers,” and that electronic currency could become popular in the future..“As modern economies become increasingly digital, bringing not only competition challenges but also large economic opportunities, central banks are considering whether they should provide a form of digital central bank money for use in everyday retail payments,” said the paper..The Royal Canadian Mint in 2012 launched its own BTC alternative called MintChip for small transactions under $20. Bank of Canada managers ordered a halt to the program in 2014..“We issue Canadian dollars,” Grahame Johnson, then-chief of funds management at the bank, testified at 2014 hearings of the Senate banking committee..“We couldn’t issue another currency. In terms of digital currency, it is not under the current legal framework.”.The bank earns $1.6 billion annually by printing and circulating banknotes..“This revenue is used by the Bank of Canada to pay our expenses,” said Johnson..The mint sold its MintChip program at a loss to private investors in 2015..The sale was valued at $5 million in cash with a 4% IOU for $11 million. The mint is believed to have lost more than $29 million on the venture, though management has never fully disclosed its research and development costs..Cabinet, in a 2016 Letter Of Expectations to the Mint board, said it must be notified of any “new areas of activity” before funds were spent..“The mint should focus its efforts on maximizing the efficiency and competitiveness of its core activities,” said the letter obtained through Access To Information..David Bradley, of Alberta-based Bitcoin Well said the bank’s move isn’t needed..“Central bank digital currencies don’t truly compete with bitcoin. In 2021, most of our money is digital. It doesn’t really matter whether those dollars are tracked in a database at RBC or on a blockchain run by the Bank of Canada,” said Bradley..“The real innovation that bitcoin brings to the table is changing who can create money. .As long as governments can print unlimited money and spend it on re-election promises, they will. This is a de facto tax on anyone holding dollars. .“Bitcoin fixes this by limiting the supply of the currency to a hard cap of 21 million bitcoins.”
