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After a lengthy spell of research and public consultations that began in 2017, the Bank of Canada has decided to discontinue its efforts to create a digital version of the Canadian dollar. 
This decision comes even as the central bank’s study resulted in a staff discussion paper titled “<a style="color: #0000ff;" href="https://www.bankofcanada.ca/wp-content/uploads/2024/07/sdp2024-11.pdf">The Role of Public Money in the Digital Age</a>,” released in 2024. This paper outlined the potential benefits of a digital currency, including the ability to maintain monetary stability and control as technology continues to evolve. 
The sudden halt to these efforts has raised questions about why the Bank of Canada would pull back after investing years in research and public engagement, which was albeit driven by the decline in cash usage and the growing shift toward digital payments. 
<h2 id="span-style-font-weight-400-why-canada-s-central-bank-paused-its-cbdc-initiative-span">Why Canada’s Central Bank paused its CBDC initiative</h2> 
In December 2023, the<a style="color: #0000ff;" href="https://www.bankofcanada.ca/wp-content/uploads/2023/11/Forum-Research-Digital-Canadian-Dollar-Consultation-Report.pdf"> Bank of Canada concluded</a> a six-week online consultation regarding the potential issuance of a digital Canadian dollar. Nearly 90,000 Canadians participated in the survey, revealing significant concerns about privacy and trust in institutions. Although many believed that cryptocurrencies are a widely accepted form of payment, the results indicated that 85% of respondents would not use a digital Canadian dollar, with transaction privacy being the top reason why. 
<figure id="attachment_18494" aria-describedby="caption-attachment-18494" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-full wp-image-18494" src="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future.png" alt="Respondents' preference to use a digital Canadian dollar in the future. Source: Bank of CanadaRespondents' preference to use a digital Canadian dollar in the future. Source: Bank of CanadaRespondents' preference to use a digital Canadian dollar in the future. Source: Bank of Canada" width="801" height="316" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future.png 801w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-300x118.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-768x303.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-600x237.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-to-use-a-digital-Canadian-dollar-in-the-future-750x296.png 750w" sizes="(max-width: 801px) 100vw, 801px">
 <figcaption id="caption-attachment-18494" class="wp-caption-text">
 Respondents’ preference to use a digital Canadian dollar in the future. Source:<a href="https://www.bankofcanada.ca/wp-content/uploads/2023/11/Forum-Research-Digital-Canadian-Dollar-Consultation-Report.pdf"> Bank of Canada</a>
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</figure> 
This lack of trust extended beyond just the concept of a digital currency; 79% of participants doubted the Bank of Canada’s ability to protect sensitive information. Additionally, 78% felt their feedback would not influence decision-making. 
<figure id="attachment_18483" aria-describedby="caption-attachment-18483" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-full wp-image-18483" src="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar.png" alt="Respondents’ trust in Bank of Canada to issue a secured digital Canadian dollar" width="802" height="222" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar.png 802w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar-300x83.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar-768x213.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar-600x166.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-trust-in-Bank-of-Canada-to-issue-a-secured-digital-Canadian-dollar-750x208.png 750w" sizes="(max-width: 802px) 100vw, 802px">
 <figcaption id="caption-attachment-18483" class="wp-caption-text">
 Respondents’ trust in Bank of Canada to issue a secured digital Canadian dollar. Source:<a href="https://www.bankofcanada.ca/wp-content/uploads/2023/11/Forum-Research-Digital-Canadian-Dollar-Consultation-Report.pdf"> Bank of Canada</a>
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</figure> 
In fact, 92% would prefer their current payment methods to a digital Canadian dollar. This overwhelming distrust obviously creates substantial challenges for any future digital currency rollout. 
<figure id="attachment_18484" aria-describedby="caption-attachment-18484" style="width: 100%" class="wp-caption aligncenter">
 <img loading="lazy" decoding="async" class="size-full wp-image-18484" src="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods.png" alt="Respondents' preference on using a digital Canadian dollar instead of their current payment methods" width="805" height="196" srcset="https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods.png 805w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods-300x73.png 300w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods-768x187.png 768w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods-600x146.png 600w, https://defi-planet.com/wp-content/uploads/2024/10/Respondents-preference-on-using-a-digital-Canadian-dollar-instead-of-their-current-payment-methods-750x183.png 750w" sizes="(max-width: 805px) 100vw, 805px">
 <figcaption id="caption-attachment-18484" class="wp-caption-text">
 Respondents’ preference on using a digital Canadian dollar instead of their current payment methods. Source: Bank of Canada
 </figcaption>
</figure> 
Given these findings, the Bank of Canada decided to halt its digital currency plans. In a<a style="color: #0000ff;" href="https://www.cbc.ca/news/business/bakx-boc-cbdc-digital-currency-1.7326887"> statement to CBC</a>, the bank said that despite extensive research into the technology and economics of a secure public money system, launching a digital Canadian dollar is not a priority at this time. Instead, the bank will focus on broader research into domestic and global payment trends. 
Governor Tiff Macklem echoed this during a<a href="https://www.bankofcanada.ca/2024/09/economic-growth-during-uncertain-times/"> speech</a> on September 24, 2024, titled Economic Growth During Uncertain Times. In it, he explained that while the bank had developed significant knowledge about central bank digital currencies (CBDCs), there wasn’t a compelling reason to pursue one for Canada at this moment. 
Though this isn’t surprising, the central bank<a style="color: #0000ff;" href="https://defi-planet.com/2023/08/cbdcs-wont-address-canadas-payment-problems-bank-of-canada/"> has hinted at this move</a>; the decision bears significant weight in view of the country’s growing crypto market and the global trend on CBDCs. 
<h2 id="span-style-font-weight-400-implications-of-the-bank-of-canada-s-decision-for-the-country-s-crypto-market-span">Implications of the Bank of Canada’s decision for the country’s crypto market</h2> 
The Canadian crypto market has steadily grown, with<a style="color: #0000ff;" href="https://www.experiencetheblog.com/2024/06/cryptocurrency-adoption-rates-and-usage-statistics-worldwide.html"> over 3 million Canadians owning digital assets in 2024</a>. By 2028, it’s<a href="https://www.moonpay.com/learn/web3/canada-cryptocurrency-statistics"> expected</a> that around 32% of the population—12.95 million users—will participate in the crypto space. 
This growth has largely been driven by retail investors. In fact, 8 out of 10<a style="color: #0000ff;" href="https://www.kitco.com/opinion/2024-08-01/analyzing-canadas-crypto-market-forged-regulation-tempered-bull-run#google_vignette"> crypto platforms</a> in Canada have expanded their services to meet growing retail demand. However, without a CBDC, Canada’s market dynamics may shift in an interesting direction. 
By choosing not to introduce a CBDC, Canada gives private cryptocurrencies, like Bitcoin and Ethereum, room to expand without direct competition from a government-backed digital currency. As Dean Skurka, CEO of Canadian crypto platform WonderFi,<a style="color: #0000ff;" href="https://cointelegraph.com/news/canada-retail-crypto-trading-growth"> pointed out</a>, there is a resurgence in retail crypto interest in 2024, particularly after the Bank of Canada’s recent interest rate cuts, which boosted public spending. 
With no immediate plans for a CBDC, Canada’s financial institutions and crypto platforms may see this as an opportunity to innovate. By enhancing trading, custody, and settlement services, they can capture a larger share of the growing retail market. This contrasts with countries that have launched CBDCs, where private platforms must compete with state-backed alternatives that can limit innovation. 
However, the absence of a CBDC also introduces potential risks. Some institutional investors still view private cryptocurrencies with skepticism, preferring the security and legitimacy of a government-issued digital currency. This could limit Canada’s ability to attract the level of institutional investment seen in countries with CBDCs, where more stable, regulated digital currencies may inspire greater confidence. 
<h2 id="span-style-font-weight-400-global-trends-on-cbdc-development-and-canada-s-interesting-stance-span">Global trends on CBDC development and Canada’s interesting stance</h2> 
Globally, the development of CBDCs is becoming a dominant trend. The<a href="https://www.imf.org/en/News/Articles/2022/02/09/sp020922-the-future-of-money-gearing-up-for-central-bank-digital-currency"> IMF</a> and Bank for International Settlements (BIS)<a href="https://www.bis.org/publ/arpdf/ar2021e3.htm"> have</a> endorsed CBDCs as the future of money, praising their potential for enhancing government control, reducing fraud, and streamlining cross-border payments. Countries like China and the Bahamas have already launched their CBDCs, while others like the United States, Russia, and Iran are quickly advancing their initiatives. 
The Bahamas, for example,<a href="https://defi-planet.com/2024/07/bahamas-announces-new-regulations-to-mandate-commercial-banks-to-support-its-cbdc-sand-dollar/"> introduced</a> the world’s first CBDC, the “Sand Dollar,” in 2020, and continues to enhance its digital economy through the currency. Iran has already<a style="color: #0000ff;" href="https://defi-planet.com/2024/06/irans-cbdc-digital-rial-will-be-available-for-domestic-micropayments-on-kish-island-from-june-21/"> rolled out</a> its digital rial for micropayments, and Russia’s largest bank, Sberbank, is<a href="https://defi-planet.com/2024/09/russias-largest-bank-to-offer-digital-ruble-to-customers-starting-early-2025/"> planning</a> to offer the digital ruble by 2025. These countries are betting on CBDCs as a way to improve efficiency in cross-border payments and provide more secure, traceable transactions. 
By not pursuing a CBDC, Canada risks falling behind in this evolving global ecosystem. As more countries adopt CBDCs, cross-border transactions are likely to become increasingly dominated by these state-backed digital currencies. This could put Canada at a disadvantage in global trade, as it may not be able to tap into the efficiencies that CBDCs might offer for transferring value across borders. 
On the flip side, Canada’s decision to allow decentralized cryptocurrencies to flourish without direct competition from a CBDC could attract businesses and investors who prioritize financial autonomy and privacy. Bitcoin, Ethereum, and other cryptocurrencies, which operate independently of central authorities, align with the ethos of financial freedom that many crypto enthusiasts champion.&nbsp; 
By avoiding the complexities of state surveillance and control that come with CBDCs, Canada is positioning itself as a market-driven financial environment, offering citizens and institutions more freedom in managing their digital assets. 
Only time will tell whether this decision leads to missed opportunities for Canada or newfound freedoms for DeFi in the country. 
&nbsp; 
Disclaimer: This article is intended solely for informational purposes and should not be considered trading or investment advice. Nothing herein should be construed as financial, legal, or tax advice. Trading or investing in cryptocurrencies carries a considerable risk of financial loss. Always conduct due diligence.&nbsp; 
&nbsp; 
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The post <a href="https://defi-planet.com/2024/10/why-canadas-central-bank-is-halting-plans-for-a-digital-canadian-dollar/">Why Canada’s Central Bank is Halting Plans for a Digital Canadian Dollar</a> appeared first on <a href="https://defi-planet.com">DeFi Planet</a>.

Why Canada’s Central Bank is Halting Plans for a Digital Canadian Dollar

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