By Gleb Lisikh
Amidst cryptocurrency booms and innovations in blockchain technology, governments have been showing great interest in creating their own digital monetary imprint through what is called a central bank digital currency (CBDC).
According to the Atlantic Council, a NATO-aligned think tank, the number of countries investigating a CBDC has exploded from 35 pre-COVID-19 to 130 today. China, for example, has a pilot program covering over 260 million people which allows transactions for public transit, stimulus payments, and e-commerce. Russia’s “digital ruble” went into action last month as an optional currency.
Canada also joined the retail-level CBDC race in 2020 when the Bank of Canada announced it was planning to “build the capacity to issue a general purpose, cash-like CBDC should the need to implement one arise.” The possible “need” was not specified.
Earlier this year, the bank launched online public consultation on the features Canadians might want from a digital dollar. The process closed in June after only five weeks, and its results so far are not published. So it’s hard to tell just who those CBDC aficionados, capable of providing meaningful feedback on such a complicated topic within such a compressed timeframe, actually were.
The Bank of Canada did, however, admit that the enthusiasm is just not there. A recently released analysis, Unmet Payment Needs and a Central Bank Digital Currency, concluded there’s a decided lack of consumer drivers for adopting CBDC in Canada. Canadians, we should note, already have access to a host of convenient, simple, and low-cost digital means of exchange: credit cards, debit cards, email, e-transfers and cryptocurrencies, to name a few. And all of these are readily convertible into cash. What we don’t have is a centralized, official, government-run digital currency that isn’t convertible to cash.
Nevertheless, the Bank of Canada claims that the need for one exists, and it is to address the alleged payment gap through a “new form of money [that] would be issued by the Bank of Canada and provide benefits similar to cash.” Why would we go cashless if the need for cash still exists—just to create the very gap that the bank would fill with its CBDC? The reasoning seems absurd.
Another reason to create a CBDC is to counter the proliferation of cryptocurrencies. These, the bank stated when announcing the aforementioned public consultation, “Could compromise the role of an official, centrally issued currency—the Canadian dollar—in our economy and pose a risk to the stability of our financial system.”
That rationale sounds more plausible—and more worrisome. It’s plausible in light of the difficulties the Justin Trudeau government had in seizing donations made in crypto to last year’s Freedom Convoy.
In all, nearly $25 million was raised for the truckers and other protesters across a variety of crowdfunding platforms and conventional banking means. A graphic from the Rouleau Commission showed that virtually all of those donations were stopped by the government and never reached the protesters. Except for an unknown amount of cash—and Bitcoins. About $800,000 out of $1.2 million worth of Bitcoins were distributed to about 100 truckers through a process devised by one of the convoy organizers, Nicholas St. Louis, just before the government moved to seize the related crypto “wallets.”
A longer version of this story first appeared at C2CJournal.ca