Bank of Canada Senior Deputy Governor Carolyn Wilkins has said in a speech that the country’s Central Bank is considering the impact that Bitcoin and other digital currencies could have on monetary policy. The speech centered on how innovation can create new monetary policy tools at a time when interest rates are near zero.
Commenting on cryptocurrencies and whether these currencies could usurp national currencies, Wilkins said,
“this would create a new dynamic in the global monetary order, one in which central banks would struggle to implement monetary policy…. central banks couldn’t act as lenders of last resort as they do for their own currencies. This means that households and businesses could suffer important losses if such an e-money were to crash.”
Wilkins also commented on the prospects of a cashless society saying,
“Consider a cashless society where everyone uses e-money, which is monetary value stored electronically and not linked to a bank account. If this money were denominated in Canadian dollars, who should issue it? Who should earn the seigniorage? The central bank, as it does today, or the private sector? What would the financial system look like in each case?”
While Central Banks around the world are becoming more proactive in considering new payment technologies like Bitcoin and other digital currencies, Canada has been among the forefront with its own digital currency solution (MintChip) that was eventually sold off and is demonstrating its continued thought leadership on the subject.
Overview by Tristan Hugo-Webb, Associate Director, Global Payments Advisory Service at Mercator Advisory Group
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