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If the Bank of Canada rolled out a digital currency to enable Canadians to make cashless payments, it would only gain traction if those who already have access to a range of payment options were to use it at scale, which in turn would convince businesses to accept it, according to new research from the Bank of Canada.\u00a0<\/span><\/p>\nGaining this widespread adoption would be a tough slog, the staff discussion paper published Aug. 10 said, since there would be a \u201cweak\u201d incentive for those who already have plenty of options when it comes to paying for goods and services.<\/p>\n<\/section>\n
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\u201cThis suggests that addressing unmet payment needs for a minority of consumers by issuing a CBDC (central bank digital currency) could be challenging under the conditions explored in this paper,\u201d the authors said. \u201cThe 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.\u201d<\/p>\n
The Bank of Canada, like other central banks around the world, has been exploring whether there\u2019s a case to be made for launching government-backed fiat currencies in digital form, even asking Canadians for their thoughts on the matter in the spring of 2023.<\/p>\n
Cashless society<\/h2>\n
So far, the central bank has identified two scenarios that could warrant the introduction of a general-purpose, cash-like central bank digital currency: the emergence of a cashless society or the widespread use in Canada of an alternative digital currency such as bitcoin or one issued by a foreign central bank.<\/p>\n
A key concern with a cashless society is that some people may no longer be able to make payments and participate fully in the economy. The Bank of Canada\u2019s research paper looked at whether a CBDC geared to payments would close such a gap, but found that only a small percentage of consumers are not part of a typical, well-connected cohort that has access to multiple payment methods, including cash, bank accounts and debit or credit cards.<\/p>\n<\/section>\n