Bank of Canada Researching Central Bank Digital Money

News: Welcome to the Canadian Paper Money Forum.

Interesting read on some of the research being done by the Bank of Canada when it comes to digital currency, if it was officially issued by a Central Bank.

https://www.bankofcanada.ca/publications/the-economy-plain-and-simple/the-road-to-digital-money/

This is an appropriate path for BOC to follow after their staff (Engert, Fung & Hendry) published:
"Is a Cashless Society Problematic?"
which you can download (a PDF copy) from the BOC site. 
I posted a link in a separate thread you ("coinsplus" started "How far will Canadians go in parting with their bills & coins" in GENERAL COMMENTS: found at https://cdnpapermoney.com/index.php?topic=15434.0

To quote the Engert, Fung & Hendry article:
Central banks typically supply cash to meet public demand for bank notes, so a sustained decline in the demand for cash would cause central banks to face the following two sets of questions.
• Is a cashless society problematic? Does a cashless economy have adverse implications? What are the consequences for a central bank, the financial system and the economy?
• If a cashless society raises problems, what are reasonable responses? Should pre-emptive steps be taken to mitigate the potential erosion of the demand for cash, such as providing incentives for the public to continue to use cash or requiring financial institutions to provide cash services to the public? Should the central bank provide an electronic alternative to cash—a central bank digital currency (CBDC)?

The authors continue to look at question 1 (not question 2) and assume that society's trend towards cashless transactions is a result of convenience and a generational shift towards using technology (cell phone/Interac/debit/credit).  It is not being forced on them (though I feel that most corporations/governments are pushing it on us- so they can track our spending). Credit card (cash back & Loyalty programs) sure make it difficult not to "pass on cash" & swipe instead.

I do find it disappointing that no one has explored the question -to use Engert, Fung & Hendry words- "Should pre-emptive steps be taken to mitigate the potential erosion of the demand for cash, such as providing incentives for the public to continue to use cash or requiring financial institutions to provide cash services to the public?"
Although cash only makes up for 6% of all CDN transactions I still feel it encourages personal prudence with money & it is nice to have in emergencies.

Interesting article.  It sounds like the Bank of Canada is actually getting a little bit scared that cryptos might start interfering with their money making monopoly. They begin by misrepresenting decentralized cryptocurrencies by saying:

The issuer could

• go out of business, or
• fall victim to cybertheft

This is wrong on both counts.  In the case of bitcoin and most other cryptos there is no issuer.  This was the whole point in creating these currencies that the issuer cannot go out business or fall victim to theft or even be shutdown by government agencies since individual users are 100% in charge of their money and not dependent on any third parties.

Ironically these concerns do apply to any central bank issued currencies, crypto or otherwise.  Just because they are a government agency hardly makes them immune to theft and/or bankruptcy, as much as they would like us to think that to be the case.

They then go on to admit that:

Private digital currencies could even hurt our ability as a central bank to

• control inflation, and
• act as the lender of last resort

While they are correct on these two points, again this was the entire point of cryptocurrencies to get give individuals (rather than government bureaucrats) control over their own money.  Of course it's highly to the benefit of the government and it's allies to to be able to "control" inflation and magically create loans out of thin air.  However this power comes at the expense of savers (whose money is constantly devalued) and the entire productive economy which sees it's resources being diverted towards unproductive (but politically connected) individuals.

I also find it interesting how they constantly talk about "controlling inflation" with the naive implication being that they are fighting against inflation.  Nothing could be more ridiculous as they are the only ones with the power to actually cause inflation.  Inflation is nothing more than the result of an increase in the money supply carried out by the central bank (in concert with the commercial banks, in accordance to central bank policy).

It should be clear that the real meaning of "control" in this context is to actually cause inflation.  I think everyone knows this but the language they use seems to be deliberately deceitful.