Pandemic pushes Canada to accelerate government-backed digital currency efforts

As consumers transact digitally en masse during the pandemic, Canada’s central bank is accelerating its central bank-backed digital currency (CBDC) efforts. The project has been nicknamed the “digital loonie,” in recognition of an image of the common loon that appears on many of Canada’s one-dollar coins.

Why should we care?
Canada isn’t alone among large industrialized nations toying with the idea of a CBDC. China, whose digital yuan initiative is one of the most advanced examples of this phenomenon, is piloting a CBDC, with companies like ride hailing company Didi Chuxing and food delivery company Meituan Dianping participating. In the U.S., the Federal Reserve and the Department of the Treasury are evaluating CBDC possibilities. Central banks are concerned with non-bank digital currencies growing in adoption, which restrict central banks’ control of flows of funds. There are also issues around privacy, security, anti-terrorism, and anti-money laundering that need to be worked out. But central banks are taking CBDCs more seriously as a growing number of consumers shun cash. “Our work to prepare for the day when Canada might want to launch a digital loonie – backed by the Bank – has also accelerated,” said Deputy Governor of the Bank of Canada Timothy Lane in a speech this week. “If the public does want a digital cash-like currency, some good reasons illustrate why a central bank – a trusted public institution – should issue it.”