Bank of Canada contemplates a cashless society

In a press release, the Bank of Canada revealed that it is considering the implications of a cashless society and the preparations that would need to be made.

Discussing the subject, Timothy Lane, Deputy Governor, emphasised that Canadians are currently well-provisioned for under the current system for payments. However, he also made it clear that technology can evolve quickly and the world with it.

Therefore, he argues, it would be remiss for the Bank of Canada (BoC) to neglect preparations for the future. 

“The Bank of Canada can imagine scenarios in which we would consider issuing a CBDC (central bank digital currency) so we can continue to provide Canadians with trustworthy methods of payment,” he said.

Fuelling the future economy

The contingency that BoC is preparing for may not be too far ahead. Research conducted by Visual Capitalist has found that the majority of payments in North America (52%) are via cashless methods, with Western Europe (34%) and Asia-Pacific (35%) close behind.

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Whilst emerging economies such as South America, Africa and Eastern Europe continue to use physical currency almost exclusively (all over 91%), developed economies are reaching the point of relegating it to a niche option. 

According to the BoC, there are two situations which would prompt them to introduce a digital currency: 

1) Use of physical cash is abandoned or otherwise barely being exchanged by citizens.

2) An explosion of popularity amongst cryptocurrencies, creating a need for banks to take control away from private enterprises.

If either scenario were to occur, the BoC would expedite its plans to develop a CBDC, focusing on making it safe, easy to use and retaining a good market value.

“As the world changes, the Bank will continue to fulfil its mandate to support secure, reliable and efficient payment options that benefit all Canadians,” commented Lane.

“The goal is to provide consumers, businesses and financial institutions with a modern, fast and convenient payment system.”

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