On August 10, 2023, the Bank of Canada recently released a paper discussing the potential challenges of introducing a central bank-issued digital currency (CBDC) for the typical Canadian. The paper explored a scenario where physical cash is largely phased out, and a CBDC is introduced to help the underbanked.
However, the paper found that most Canadians have little incentive to use a CBDC, as they already have easy access to traditional financial services like bank accounts and credit cards. In fact, 98% of Canadian adults have a bank account, 87% have a credit card, and 90% of households can access high-quality internet.
While a CBDC could potentially benefit some segments of the population, such as the underbanked, there are concerns. For instance, tech-averse individuals might struggle with fewer payment options, and those reliant on cash could face difficulties with common transactions. Additionally, if there is limited adoption of the CBDC, merchants may be hesitant to accept it, reducing its usefulness.
The paper suggests that alternative measures may be more effective in helping the underbanked, such as improving internet access, expanding low-cost bank accounts, collaborating with merchants in remote communities, and maintaining the supply of physical cash.
It also emphasized the ongoing importance of physical cash, especially in emergency situations where offline payment methods are crucial. It highlighted the need for the Bank of Canada to continue issuing cash and ensuring its accessibility.
There are numerous barriers associated with CBDC, including its offline usability. To enhance its functionality in emergency situations, Samsung has recently announced a collaboration with South Korea’s Central Bank for research on offline CBDC usage. This collaboration aims to improve its applicability in various situations around the world. The paper acknowledged that while some Canadians might find reasons to use a CBDC, the overall adoption could be hindered by various barriers. The paper underscores the significance of cash and the need for a thoughtful approach to any potential introduction of a CBDC.
In a report by Todayq News on August 9, 2023, it was found that the majority of Russian citizens lack confidence in the digital ruble. However, the government has collaborated with 13 banks and a select group of clients to focus on retail payment options. The aim is to facilitate cross-border payments, enable seamless transactions between individuals, and streamline automated payments, among other objectives.
Based on a recent survey by the Bank for International Settlements (BIS), it was observed that 93% of central banks worldwide are currently exploring CBDC initiatives, and it is expected that nearly 15 retail CBDCs will soon be in circulation across the globe.