Bank of Canada Developing Prototype Digital Currency

The Bank of Canada isn’t giving up on the prospect of a digital currency.

Central Bank Deputy Governor Tim Lane said that Bank of Canada officials are getting ready to move quickly should the need for a digital currency become more evident.

Specifically, the central bank has begun to look at potential features and requirements of a digital currency, Lane remarked in an address he delivered on Tuesday in Montreal. The central bank is now actively developing a prototype digital currency, according to Lane

"We need to move forward to work out what a potential CBDC might look like and how it could be managed, if the decision were ever taken to issue one." Lane said regarding preparations for a potential central bank digital currency in Canada.

Other central banks are coming to grips with emerging payment technologies. Private-sector initiatives such as Facebook Inc.'s (NASDAQ:FB) Libra are adding urgency to the debate over how digital currencies should be handled.

The Bank for International Settlements and the International Monetary Fund have called for central banks to at least study the possibility of a digital currency as private sector firms experiment with competing units of exchange.

The Bank of Canada sees two scenarios where a digital currency might be needed: first, if the use of cash is restricted or eliminated, and second, if private cryptocurrencies make serious inroads.