Bank of Canada’s Report Sparks Fresh Insights into CBDC Adoption

Key Points:

• The Bank of Canada questions the appeal of CBDC due to existing financial access for most Canadians.
• Shifting from cash to digital currency could exclude the tech-averse.
• The report recommends improving alternatives like internet access and bank accounts rather than focusing solely on CBDC.

A recent report released by the Bank of Canada has indicated that widespread adoption of the central bank’s digital currency (CBDC) might face challenges due to the lack of compelling reasons for Canadians to embrace it.

The discussion paper, which emerged on August 10, delved into the potential role of a CBDC in a scenario where physical cash becomes largely obsolete, particularly in aiding those underserved by traditional banking services.

Surprisingly, the study discovered that most consumers exhibit “limited” motivation to adopt a central bank digital currency. This conclusion arises from that most Canadians already have easy access to mainstream financial services like bank accounts and credit.

The statistics reveal that 98% of Canadian adults hold a bank account, 87% own a credit card, and even 90% of rural and urban households enjoy high-quality internet access.

The report also highlighted the potential downsides of replacing physical cash with digital currency, primarily impacting those less comfortable with technology and individuals relying heavily on cash transactions.

However, it put forth alternative solutions to assist the underbanked population, such as enhancing internet availability, expanding low-cost bank account options, fostering better collaboration between merchants and remote communities, and maintaining the supply of cash.

Additionally, it underlined the indispensability of cash by illustrating how it remains the only means of transaction during emergencies, such as extreme weather events or widespread power failures.

Back in May, the Bank of Canada initiated a public consultation to gauge interest in a prospective CBDC. While the central bank has been exploring this idea for several years in response to declining cash transactions, the ultimate decision to implement a digital currency rests with the federal government.

DISCLAIMER: The information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your research before investing.