Canada and its central bank can be considered as yet another entity that will soon join the group of digital economies that work in their digital currency. Now, although the Bank of Canada does not express any plan on the launch of its digital currency, it does not rule out the possibility of issuing it in the foreseeable future either.
The ability to issue a digital currency will also have some effect on the way that US regulators perceive and treat cryptocurrencies. We will explain how in the next section.
A journey of cash to a cashless economy
Before discussing how the Bank of Canada is preparing to launch its digital currency, why don't we take a look at how we got to the point where having a blockchain-based payment method became a reality?
The development of credit / debit cards changed the way we pay for things. From then on, we slowly stopped depending on cash and started using digital payments to buy, buy food, or pay for public services. Now, if you hand over cash to the cashier, they will most likely seem very surprised.
Many countries, including Canada, have already moved to online banking mechanisms. About 10 years ago, for example, Canadians used much more cash in payments than they do now: more than half of the cash payments back then compared to just a third today.
Inadvertently, this means that virtually every industry in the country relies heavily on online payments. Online games, for example, are the ones that do the heavy lifting in this regard.
It only takes a google search for an online casino game or the list of casino bonuses that Canada has to offer, And you will immediately find platforms that rely heavily on credit / debit cards as well as various other eWallet solutions.
Also, and this is directly related to the point that we are trying to make, some of these casinos are eager to incorporate solutions with cryptocurrencies on their platforms. While this does not completely change the gaming landscape, it takes the digital payment solutions that exist in the industry to a whole new level.
From the looks of it, we believe the digitization trend will only increase in Canada, as well as in other countries.
Cash as a last resort
This does not mean that the cash is completely out of the picture. Of course, when the economy is doing very well and the banks are not having major problems, we prefer to store most of our funds in private banks. In this way, we can access them through online banking and our credit / debit cards.
However, when the economy is in crisis and the crisis is at its peak, the first likely suspects are always private banks. This means that our funds are also in serious danger. In times of economic difficulties, people tend to focus on cash. Of course, even cash can't save us from the ravages of rapid inflation / deflation, it can be a better way to store value compared to bank accounts.
Paying attention to the Canadian central bank
With that in mind, the central bank of Canada, the Bank of Canada, is actually paying attention to what the market indicates and is preparing for the future. According to the Deputy Governor of the Bank of Canada, Tim Lane, currently there are no specific plans for the immediate launch of Canada's own digital currency, however, the institution is still working on a prototype that will be ready if the market demands it.
The Bank of Canada itself points out that the country's own digital currency will unite the advantages of two means: it will provide the convenience and efficiency of modern online payments while maintaining the reliability of cash.
On the one hand, the digital currency offered by the Canadian central bank will be among the most effective payment platforms active in the country. Since it will be integrated into the blockchain platform, the currency will use all its benefits: security, anonymity, fast payments, less limitations, etc. This will take online and credit / debit card payments to a whole new level.
On the other hand, the Canadian digital currency will also act as a hedge against possible financial crises, just like cash. When the tokens are down, Canadians will be able to quickly convert their bank funds into blockchain funds. What this means is that they trust the central bank more than private banks.
Now, it does not mean that central banks are unmistakable in their actions, they are even more reliable than commercial banks. Look at it this way: During crises, it is incumbent on central banks to provide liquidity to and rescue commercial banks. As such, that explains almost everything.
Why should the United States pay more attention to a digital currency?
As noted earlier, news about the Canadian digital currency may likely have a significant effect on encryption policies in the US Currently, American politicians are not as enthusiastic about cryptocurrencies as the private sector in the country. In fact, many politicians are completely opposed to this technology, calling for a total government ban.
However, things may change in favor of cryptocurrencies if the Canadian government suddenly launches its own digital currency. The two economies, Canada and the United States, are closely intertwined, exchanging labor, services / products, and capital all the time.
Now, when Canada expresses its unequivocal support for cryptocurrencies, many cryptocurrency-based entities in both Canada and the US will inevitably emerge, as if they no longer exist. This will definitely make politicians change their attitudes towards digital currencies and implement a more liberal policy because if they do not, many of the main market players will be damaged quite significantly.
Great challenges ahead
In addition to the advantages of having a state-issued digital currency, we have yet to mention some of the challenges facing the mass adoption of cryptocurrencies. For example, the entity that incorporates it may be the victim of a cyberattack, partially or completely destroying its business. Furthermore, the emitter may lag behind the technology and its challenges and become a massive failure.
Either way, the foundations are already in place for digital currencies to become the mainstream. As Canada and its central bank express readiness to issue new digital currency, things are expected to move at a much faster rate.