Bank of Canada Report Examines Feasibility of Central Bank Digital Currency for ‘Basic Payments’

The Bank of Canada has studied possible systems for an online retail central bank digital currency (CBDC) in a new report, with the authors noting that though such a system is feasible, any recommendations on the introduction of a digital currency are outside the scope of study.

The report, titled “A Retail CBDC Design For Basic Payments Feasibility Study” was released June 13.  The authors said their analysis of potential systems identified a “promising architecture well-suited for basic payments” and summarized the system’s security, money supply integrity, privacy, and scalability.

“It suggests that such system designs can be fast and cheap for basic payments, with high privacy, although some areas such as integration with retail payments systems, performance of auditing and resilience of the core system state require further investigation,” said the report, which was first covered by Blacklock’s Reporter.

The report’s authors said there are other “promising architectures” for an online retail CBDC, but it would leave that analysis for further explanation. The authors also said they were not recommending the issuance of a CBDC “now or sometime later” as that decision is “outside the scope of this analysis.”

The Bank of Canada said in September 2024 that it had done years of “significant” research into a digital Canadian dollar, but that the work had been completed and it would be “shifting its focus to broader payments system research and policy development.”

The Bank said it would be focusing instead on overseeing and supervising payment systems, developing policies for wholesale and retail payment infrastructure, and working with other central banks on improving cross-border payments. The Bank said it would continue monitoring global retail CBDC developments and publish related research.

An earlier report by the central bank released last fall found that Canadians were generally skeptical of CBDCs, saying certain groups may “strongly resist a digital dollar if they conflate its launch with the end of cash issuance.”

The report also said most participants surveyed would support the issuance of a hypothetical digital dollar, but broad early adoption is unlikely given that current payment methods meet the needs of most Canadians. It said financially “vulnerable” Canadians have the most to gain from a new payment method, but are also the most resistant to adoption.

An August 2023 report also found that a CBDC would face barriers to adoption without significant investment by the Bank of Canada, and several factors would prevent widespread adoption. This included most adults having access to a range of payment methods and the continued widespread usage of cash payments.

A Bank of Canada report released later in November 2023 found that 85 percent of 89,423 Canadians surveyed said they would not use a digital Canadian dollar, while 12 percent said they would “potentially” use it, and 3 percent said they did not know. Additionally, 82 percent said the Bank should not even be researching CBDC.

According to the Atlantic Council’s CBDC tracker, 134 countries and currency unions, which represent 98 percent of global GDP, are currently exploring a CBDC. Every G20 country is exploring a CBDC, while the countries of Jamaica, Nigeria, and the Bahamas have fully launched a CBDC.