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Digital currencies analysed by the Bank of Canada

Categories : Cash generates security, Cash is trust
April 13, 2017
Tags : Alternative modes/methods of payment, Regulation, Virtual currencies
The Bank of Canada published a working paper stating that digital currencies can only circulate alongside banknotes.
Communication Team / Equipo de Comunicación

Last February, the Bank of Canada published a working paper comparing the introduction of banknotes with digital currencies. The analysis, named “Canadian Bank Notes and Dominion Notes_Bank of Canada_2017“, looks back at the country’s history with both privately and government-issued banknotes and draws parallels with the numerous digital currencies that are gradually arriving on the market. The analysis reviews the issuance of banknotes from 1800 until the establishment of the Bank of Canada in 1934 and compares competing public and private currencies.

Ben Fung, Scott Hendry and Warren Weber, authors of the working paper, aimed to assess the possible risks and benefits of the introduction of a vast group of new currencies made both by central banks and private entities. Several conclusions could be drawn from the comparison.

First, they determined that private digital currencies might circulate widely and simultaneously, “but only with appropriate government regulation to ensure their safety, soundness and uniformity”. In addition, they estimated that a central bank may launch its own e-currency, but that this one will not necessarily replace the existing private digital currencies and would conversely rather be an option among others. Finally, the authors suggested that these new forms of money can also be victims of counterfeiting and are therefore not necessarily more secure than banknotes.

To read the original article [paywall], please click here.