After several years of exploring the possibility of introducing a digital currency in Canada, the royal bank of Canada is now shelving the idea. Furthermore, the Royal Bank of Canada has also confirmed to CBC News that it has shifted its focus away from the idea of introducing a digital Canadian dollar. This was previously used for online purchases and money transfers.
Also, the Royal Bank of Canada had launched the research project in 2017. This was done in response to the vast range of rapid digitalization and changes in how Canadians make purchases. This was followed by a public consultation process in 2022.
Plus, this summer, the Royal Bank of Canada released a staff discussion paper that argued the country would need its own digital currency. This would be important as it will help to maintain monetary sovereignty and financial stability, among other reasons, as people continue to use less cash.
With regards to it, now the central bank is a little less eager to develop a digital Loonie.
“The Bank has undertaken significant research towards understanding the implications of a retail central bank digital currency, including exploring the implications of a digital dollar on the economy and financial system, and the technological approaches to providing a digital form of public money that is secure and accessible,” the bank said in an email statement.
However, the Royal Bank of Canada mentioned that its focus will be on preparing for the ongoing evolution of payments. This is to be done both in Canada and around the world, through the efforts of policy research and analysis.
Royal Bank of Canada: What Has Other Countries Planned with regard to Digital Currency?
More than 130 countries in the world are exploring the idea of a central bank digital currency. This was stated according to a database from the Atlantic Council, a Washington, D.C.-based think-tank. So far, only three nations have holistically launched one. This includes the Bahamas, Jamaica, and Nigeria.
“One of the things that this cryptocurrency revolution has brought to the forefront is that we need to do more innovation,” said Karl Schamotta, chief market strategist with Corpay, which helps Canadian companies deal with currency risk.
“But at the same time, we also need to preserve safety and many of the features of the monetary system that have been created over centuries and tested out over time,” he said.
A digital Loonie doesn’t offer many advantages right now, said Schamotta, so he’s not surprised the central bank has cooled its enthusiasm.
Why are Digital Currencies Important?
Digital Currencies or digital money makes it easier for central banks and the Royal Bank of Canada to effectively implement the monetary policy. This is because they do not need to collect and store physical money. They also need not collect assets to influence the inflation or create financial system stability.
Several systems already perform transactions in all forms with digital versions of money. For example, credit card systems lets one purchase goods and services on credit. Wire transfer systems also enable the movement of cash across borders.
Advancements in Digital Money
One of the key advancements in DLT systems is historically linked to encryption methods that can chain blocks together. This is called a blockchain. Blockchains improve the resiliency of a financial network. This is because they make it very difficult to change records or access them.
A blockchain with a decentralized and distributed validation mechanism also solves the double-spending problem. This is where a digital asset can be spent more than once. This is because there is no physical transfer. When there is an extensive network of automated validators checking encrypted transactions linked by historical information, double-spending is not possible.
Plus, a large and powerful network is orders of magnitude faster than individual computers or small groups. This cannot keep up with the processing rates of the bigger networks. This speed makes a network uneconomical and exceedingly hard to hack.
Conclusion
Thus, this is what you should know about the digital currency. Many countries have opted for it as it is very convenient. Thus, you must also opt for it and make out certain options that are well noted with this need thoroughly and properly.