OTTAWA, Feb 10 (Reuters) - The COVID-19 pandemic has added
urgency to the Bank of Canada's development of a digital
currency and a decision could come sooner than previously
thought, a senior policymaker said on Wednesday, though he noted
that a launch was not a "foregone conclusion."
Bank of Canada deputy governor Tim Lane, speaking to a
digital intelligence audience, also noted that while the
pandemic has boosted cryptocurrencies like Bitcoin, recent
prices spikes look like "speculative mania" and said the
offerings are not plausible as the currency of the future.
"For several years, the Bank of Canada has been analyzing
which circumstances might lead Canada to decide to issue a
digital currency. The pandemic may bring us to a decision point
sooner than we had anticipated," said Lane.
While the pandemic had accelerated the central bank's work
to prepare for potential launch of a digital dollar, that day
has not yet arrived, said Lane.
"A digital currency is by no means a foregone conclusion,"
he said, later adding that Canada is front-runner among its
peers on development, but behind countries like China, which has
launched pilots of its offering.
Lane, in a Q&A session, played down concerns over China
getting first-mover advantage saying that Canadians are unlikely
to use a digital renminbi for everyday purchases, but noted a
widely adopted option could pose a risk.
"We can certainly imagine a situation where other central
banks would launch a digital currency that could come to be used
increasingly in Canada," he said. "If that were to happen...
that could start to threaten the role of the Canadian dollar."
Bolstering the chance of Canada launching its own digital
currency is a recent shift by Canadians away from using cash,
though Lane noted it was unclear if that would continue
post-pandemic, and the rise of "deeply flawed" cryptocurrencies.
"Cryptocurrencies such as Bitcoin do not have a plausible
claim to become the money of the future," said Lane. "The recent
spike in their prices looks less like a trend and more like a
Lane added that while there is more potential in so-called
stablecoins, backed by safe assets, serious data privacy
concerns remain, especially if offered by technology companies
that already mine customer data for profit.
"If that business model were used as a foundation for the
dominant method of payment in the economy, the issuer would gain
control over an enormous range of data - bringing with it
overwhelming market power," he said. "In effect, a technology
company could become the gatekeeper of the entire economy."
Facebook has announced plans to launch a stablecoin,
prompting global political leaders to worry about regulation.
(Reporting by Julie Gordon and David Ljunggren in Ottawa
Editing by Nick Zieminski)