The Bank of Canada has released a staff paper detailing several benefits of CBDC adoption, citing smart contract functionality as a major boon.
Canada Explores CBDC Benefits
Canada’s central bank appears to be bullish on CBDCs.
In a staff paper published Tuesday, the Bank of Canada has laid out a positive case for CBDC adoption.
The authors of the paper outline several potential benefits, such as promoting competition in the financial sector and improving consumer choice. Additionally, the paper explores several ways smart contract functionality can improve money management, stating:
“Smart contracts could enable programmable money by adding certain attributes to it. For example, money could be programmed to gain or lose value over time, or it could be programmed to be used in transactions for only specific goods or services.”
With the addition of “programmable money,” the bank also noted that reliance on costly third parties and intermediaries could be reduced or eliminated, further streamlining the financial system.
The paper concluded by noting that a CBDC could increase welfare, reduce welfare losses, and advance digital innovation, adding:
“A CBDC might be beneficial and probably necessary to ensure a competitive and vibrant digital economy.”
While the paper takes a positive outlook on CBDCs, it also stated that it would only implement one if it provided a net positive to the economy’s welfare. The paper’s authors considered two potential scenarios where this would be true: If cash was no longer widely used in Canada or because an alternative digital currency was so widely adopted, it threatened the country’s monetary sovereignty.
Until now, the Canadian central bank’s view on CBDCs has been mixed. The bank previously dismissed the value of digital currencies following Sweden’s trial of an e-krona. However, a 2019 report from the bank also highlighted several economic benefits from issuing a CBDC for public use.