Bank of Canada put pause on a digital Canadian dollar, but now it needs to talk about it

The Bank of Canada recently decided to scale back its work on a digital Canadian dollar.
This is a surprising move, particularly as the global momentum around central bank digital currencies (CBDCs) continues to grow. The Bank indicated that it would shift its focus from CBDCs to “preparing for the evolution of payments” both in Canada and abroad, through policy and analysis.
The Bank of Canada is not alone in its decision to take a step back from launching a CBDC. The Reserve Bank of Australia stated in a report that “there is no clear public interest case to issue retail CBDC in Australia” and that Australians are currently well served by the existing retail payments system.
Although the regulatory and political environments in Canada and Australia differ, this offers a useful insight: the value-add of a CBDC remains unclear to the public and existing payments are meeting most consumer needs.
The Bank of Canada communicated their shift in policy in a somewhat unsatisfactory manner, solely relying on an update posted on their website. This method of communication falls short of the standards of transparency expected from a central bank. Effective communication is key to fostering trust and informed debate, particularly on an issue that could significantly affect all Canadians.
While Canada does not need to be a first mover in the global CBDC space, disengaging from active development seems short-sighted. Major economies, such as the European Union and the United Kingdom, are forging ahead with their central bank digital currency initiatives. By taking a back seat now, Canada risks falling behind and may find itself scrambling to catch up later.
The Bank’s decision to scale down, rather than fully abandon, its CBDC efforts indicates an acknowledgment of the technology’s potential importance. However, this decision contrasts with the proactive approach outlined in the IMF’s REDI (Regulation, Education, Design and deployment, Incentives) framework. The REDI framework advocates for a comprehensive approach to CBDC adoption. Education, in particular, is crucial for building trust, countering misinformation, and improving public engagement, regardless of one’s financial literacy.
To effectively educate the public on CBDCs, the Bank should leverage a combination of communication strategies. First, the Digital Canadian Dollar webpage should act as a dedicated one-stop-shop for all CBDC-related information, offering the public with reliable sources of information and regular updates on developments and policy changes. Second, the Bank must leverage both traditional and social media to ensure broad and inclusive outreach. Finally, when communicating the benefits and risks of CBDCs, the Bank must prioritize user-friendly, accessible content to ensure the public can better understand and engage with the information.
Scaling back CBDC research and development should not mean pausing efforts to educate. This moment offers the Bank a valuable opportunity to prioritize public education on CBDCs. If a digital Canadian dollar is intended to play a significant role in the future of finance, building public awareness and trust through education will be essential for successful adoption. Without proactive engagement, public awareness will remain stagnant, leaving the central bank with the same challenges should the decision to advance a CBDC arise.
Policymakers must also improve their engagement with CBDCs, as their limited discussions on this topic has left a gap in public understanding and trust. Given that the decision to issue a CBDC rests with the government, it is imperative for our policymakers to discuss the potential benefits and risks associated with the issuance of a digital Canadian dollar.
As we navigate this critical juncture, it is essential that the Bank of Canada offers meaningful public education and engagement. Building a well-informed public now will ensure more robust dialogue later. This approach will not only enable Canadians to voice their concerns and ask informed questions, but also allow for a more inclusive conversation.
Whether or not Canada decides to proceed with a CBDC, Canadians must be educated on the potential benefits, risks, and mitigation strategies associated with any transformative digital technology. An educated public can critically assess the implications of a digital Canadian dollar and foster informed dialogue. This inclusive public discourse, engaging all stakeholders, is essential to ensure that any future decisions about CBDCs or other financial technologies align with the interests of all Canadians.