Key Insights:

• Most Canadians enjoy seamless access to traditional financial tools, questioning CBDC’s appeal.
• Physical cash’s elimination could corner tech-averse Canadians, impacting day-to-day transactions.
• Bank of Canada upholds cash’s importance, linking CBDC’s introduction to specific future scenarios.

Canada, in its distinctive stride within the digital finance realm, offers a perspective few might expect. According to a fresh report from the Bank of Canada, the majority of its citizens may not be eager to adopt a CBDC in the foreseeable future. The reason is straightforward.

Easy Access to Banking Gives Canadians Few CBDC Incentives

Besides enjoying widespread access to traditional financial tools like bank accounts and credit cards, Canadians face almost no meaningful barriers regarding their financial needs. Significantly, the Bank of Canada’s discussion paper, unveiled on August 10, paints a clear picture. Consequently, if Canada shifted towards a near-total cashless society, a CBDC might not be the saviour some predict.

The report’s analysis showed that 98% of Canadian adults have a bank account. Additionally, 87% carry a credit card. Moreover, both urban and rural households, making up 90%, have access to high-quality internet. This broad access to resources gives the average Canadian weak incentives to transition to a CBDC.

However, eliminating physical cash does raise concerns. Tech-averse Canadians might feel cornered with diminishing payment options. Simultaneously, those reliant on cash could be left stranded, unable to handle day-to-day transactions. Hence, the incentive for merchants to accept a scarcely used CBDC dwindles, further reducing its practicality.

Our latest survey results show that 92% of merchants have no plans to go cashless.

Read more results from our survey: https://t.co/DX0lUJ90u7#cdnecon #PaymentMethods #Survey pic.twitter.com/017UYxiIC4

— Bank of Canada (@bankofcanada) August 8, 2023

The Timeless Value of Cash

The importance of tangible cash, especially in emergencies, cannot be overstated. Extreme weather events or sweeping power outages would leave individuals without an offline method to complete transactions. Thus, the paper underlines that promoting offline digital payment options becomes crucial. Additionally, it emphasizes the significance of maintaining cash circulation.

The report went on to stress the Bank of Canada’s commitment. As long as the demand exists, cash will continue to flow from the central bank’s vaults. The introduction of a CBDC would only be on the cards in two scenarios: an entirely cashless Canada or the widespread adoption of foreign CBDCs or cryptocurrencies, like Bitcoin.

Besides these scenarios, the paper suggested more conventional means to aid the underbanked. Rather than venturing into the digital currency space, improving internet access, collaborating more with merchants in remote areas, expanding low-cost banking services, and ensuring a steady cash supply might be the solution.

Significantly, the paper does not claim to foretell how Canadians would respond to introducing a CBDC. Many might welcome it for various reasons. However, challenges are significant for merchants and users in widely accepting such a currency.

In conclusion, as nations worldwide grapple with the idea of CBDCs, Canada’s journey showcases unique challenges and perspectives. With cash still reigning supreme, the Bank of Canada’s thoughtful approach ensures its citizens remain at the forefront of financial decisions.