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Canada’s central bank has shelved plans for a central bank digital currency (CBDC), which has been dubbed a “digital loonie,” after almost five years of research.
A “loonie” is a common nickname for the Canadian dollar.
The Bank of Canada first launched a research project to look into the creation of a digital Canadian dollar in 2019, which was then followed by a public consultation in 2022.
In a research paper from early 2024, the central bank argued that the introduction of a CBDC could help Canadians maintain monetary sovereignty and financial stability, as cash use continues to decline across the country.
Another paper also found that if implemented, the new CBDC could slice bank deposits in the country by up to 12%.
The proposed digital loonie would have been an example of a “retail CBDC,” which could have been used by normal Canadians for everyday use cases like buying groceries or transferring money.
After confirming the decision in an official statement to CBC, the central bank did not provide a reason for the change of mind.
However, the central bank told CBC it will continue to conduct policy research and analysis on the evolution of payments, both in Canada and abroad.
Despite the potential benefits outlined by economists, the idea of a digital loonie remained relatively unpopular with many Canadians, if polling is correct. The central bank released data which found that 80% of respondents strongly opposed the Bank of Canada research and building a digital dollar in November 2023.
Many prominent figures in the Canadian government, such as Pierre Poilievre, leader of the country's primary opposition The Conservative Party, have vehemently opposed the idea of CBDC.
Poilivere suggests that the introduction could lead to "politicized banking” and introduce threats to privacy.
The Opposition Leader instead suggested that Canadians invest in cryptocurrencies like Bitcoin as a way to preserve their wealth in the face of high inflation in Canada over the past few years.
Some other major G7 economies poured water on plans for a retail CBDC in the first part of 2024.
In January 2024, the United Kingdom said that another study would be necessary before a CBDC could be implemented in the UK. Meanwhile, Australia made a similar announcement earlier this week, pivoting away from plans for a retail CBDC to a wholesale CBDC.
Edited by Stacy Elliott.