The Bank of Canada has confirmed that it is actively exploring the possibility of designing a digital currency.
Timothy Lane, a Deputy Governor at Canada’s central bank, told a University of Calgary audience on Monday that unless the risks associated with a digital currency can be carefully managed, the Bank of Canada would not issue such a currency.
"Some major reasons for caution about a central bank digital currency are concerns that it could become a vehicle for illicit transactions or that it could have significant negative implications for financial intermediation," said Lane, whose prepared remarks were made public by the Bank of Canada.
Lane said the central bank uses the term "cryptoassets" to describe cryptocurrencies because they do not do a good job of performing the basic functions of money. The value of Bitcoin has swung wildly with it topping $20,000 U.S. last year and now trading around $6,000 U.S.
However, as cryptocurrencies evolve, they could touch on the central bank's core functions, including monetary policy, financial stability, payments and currency, said Lane. He added that the Bank of Canada is not responsible for regulating cryptocurrencies, but it is monitoring their impacts on financial markets.
Earlier this year, Bank of Canada Senior Deputy Governor Carolyn Wilkins called for authorities to work towards a set of globally aligned policies governing cryptocurrencies. She said it was important to have a strategy on cryptoassets that is consistent around the world.
Lane said on Monday that differences in regulations between countries, together with the incompleteness of regulation in many jurisdictions leaves room for regulatory arbitrage.
"Differences in the regulatory treatment of these products for controlling money laundering and terrorist financing are a particularly pressing concern," he said.
