The Bank of Canada conducted research to understand how citizens would behave in a hypothetical cashless environment toward CBDC.
The research paper analyzes the role of CBDC in the potential cashless scenario. The report showed that most Canadian citizens might have weak incentives to use CBDCs, as they don’t have barriers to accessing financial services.
In other words, Canadian society has high levels of financial inclusion. According to the research, 98% of the population has a bank account, 87% holds a credit card, and 90% of rural and urban citizens have access to high-quality internet.
The Bank of Canada explained that cash is vital to Canadian society. It added that money is needed as an offline payment method for potential emergencies, such as extreme weather or widespread power outages.
The paper stressed the importance of the role of the Bank of Canada as the issuer of the traditional payment method, in other words, cash.
Finally, the research paper explained some of the characteristics CBDC would have, such as universal accessibility, non-interest bearing, limited incremental costs for the consumer at the point of transaction, and a high level of privacy, but not anonymity.
Cryptocurrency in Canada
In 2014, Canada became one of the first countries worldwide to have laws regarding cryptocurrencies. It launched the Proceeds of Crime and Terrorist Financing Act (PCA) to regulate people and entities involved with cryptocurrencies.
According to Canadian law, cryptocurrencies are not legal tender. Following Section 8 of Canada’s Currency Act, only banknotes issued and coins minted by the Bank of Canada can be taken as legal tender.
In February 2023, Canada introduced new rules mandating crypto firms to make commitments to protect investors through “an enhanced pre-registration undertaking.” Companies were expected to provide the undertaking within 30 days or cease operating in Canada.
As a result, several major crypto companies, such as Binance and Bybit, ceased operations in the country.