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Bank of Canada shelves 'digital loonie' CBDC plans

Bank of Canada shelves 'digital loonie' CBDC plans

GrafaGrafa2024/09/20 03:30
By:Mahathir Bayena

The Bank of Canada has decided to halt its plans for a central bank digital currency (CBDC), commonly known as the "digital loonie," after almost five years of research and public consultation. 

The central bank first launched the project in 2019, aiming to explore the potential benefits of a digital Canadian dollar as cash use in the country declines. 

In 2022, a public consultation was held, followed by research papers published in early 2024. 

The reports suggested that a digital loonie could help Canadians maintain financial sovereignty and stability, while also providing an everyday payment tool for citizens. 

However, the central bank noted that implementing a CBDC could lead to a reduction in bank deposits by up to 12%. 

Despite these potential benefits, the concept of a digital loonie faced opposition. 

A poll conducted by the Bank of Canada in late 2023 showed that 80% of respondents were against the creation of a digital currency. 

Opposition Leader Pierre Poilievre, a prominent figure in the Canadian government, has also criticised the idea, raising concerns about "politicized banking" and privacy risks. 

Instead, Poilievre encouraged Canadians to invest in cryptocurrencies like Bitcoin to hedge against inflation. 

The Bank of Canada has not provided a specific reason for shelving the digital loonie project but stated that it will continue to monitor the evolution of payments both domestically and globally. 

Canada is not alone in reevaluating its CBDC plans. 

Other G7 economies, such as the United Kingdom and Australia, have also scaled back or delayed their retail CBDC initiatives in 2024. 

Both nations are reassessing the feasibility of implementing a CBDC, focusing instead on wholesale applications. 

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