Recently, the Bank of Canada has released a positive case about launching a central bank digital currency (CBDC) for the country.
The central bank said that a government-issued digital currency would be a viable tool to further support the development of the economy.
The bank also said that the government could better deal with its current problems related to competition and wealth distribution through the introduction of a CBDC.
Cash is declining
With more and more services now migrating into digital space, cash is becoming less and less relevant every day. In fact, it is increasingly becoming inconvenient.
And to catch up with the digitization of the global economy, the central bank said that Canada should already start developing a digital currency for its economy.
But the Bank of Canada also recognized the ill effects that the economy would have to endure if more people stopped using cash and preferred digital payments instead.
Though this is part of an all-important migration towards progress, the bank said that the government should prepare for its impact.
CBDC, a better alternative
One major problem that the bank sees is that the country’s financial regulators may not be equipped with enough authority once CBDC starts challenging the country’s currency.
In such a scenario, there would be a gray area in determining the right economic policy for the country that might derail Canada’s economic growth.
Even with the problems that the country has to face in migrating to a digitized economy, the bank said that CBDC is simply a better and more convenient alternative than cash.
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