On Parliament Hill

Last week, the Bank of Canada (BOC) announced it was opening a consultation on the potential of developing a central bank digital currency.

I have heard from numerous constituents who have concerns about what a digital currency could, potentially, mean. Chief among those concerns is the possibility of giving even more power to the federal government.

First, we must specify, precisely, what we mean by “digital currency”. As with so many topics, different people can use the same term but mean different things. It is important to clearly define these topics, so we know exactly what is being proposed. Seeking this clarity can help to mitigate (or, in some cases, confirm) concerns related to these subjects.

Digital currency is, essentially, a blanket term that can be used for various online assets – though typically it is related only to assets that exist solely online. It should not be confused with crypto currency which is a more complex private sector form of digital currency. All crypto currency is digital currency but not all digital currency is crypto currency.

For example, when you use your debit card, no physical money is exchanged. The amount you pay will remain digital, merely transferring from one account to another via the internet. However, those debit payments do represent existing physical dollars.

If we are talking about a digital currency, proper (what is being discussed by the BOC), the digital dollar holds the same value as that physical dollar but never exists in a physical form. It just moves around online as you make those transactions.

(It should be noted that physical currency is often no longer backed up by a tangible asset (like gold) so both the digital and physical versions of the money represented hold only a subjective worth – a conversation for another time).

The Bank of Canada is proposing to explore the possibility of a purely digital version of the Canadian dollar. This discussion has been ongoing for the last decade, but the general shift towards online shopping and, particularly, the necessity thereof for many during COVID-19 have accelerated the conversation.

There are two main factors driving this conversation (and pushing the bank to consider such a move).

The first is the risk of a private sector crypto currency taking advantage of the perceived innovation void and filling it, thus the risk of a foreign tech giant becoming the “gatekeeper” of Canada’s economy.

The other factor is also market driven, simply the reality that fewer people are using cash and more and more commerce is taking place online.

It should be noted, the Bank of Canada has been clear this is not a move they want to make.

Senior Deputy Governor of the BOC, Carolyn Rogers has clearly stated cash isn’t going anywhere, and the bank’s position is, a digital Canadian dollar is not needed at his time.

It is the federal government that is driving this conversation and will ultimately decide whether to issue a digital version of the loonie.

For many, the main fear related to digital currency, focuses solely on the Trudeau Government: Chiefly that given the failures and dictatorial tendencies of Justin Trudeau, many Canadians are (with good reason) hesitant to trust the Liberal Government to create and regulate a digital currency.

Moreover, the failure of the central bank to stand up to Justin Trudeau and his reckless printing and borrowing and properly fulfill its mandate of holding inflation at 2% has also left others wondering if the institution, itself, is trustworthy to create such a currency.

There are additional security concerns.

An increasingly online economy may provide convenience for consumers, but it also provides an easy target for hackers to create chaos – think back to last summer when Rogers’ network went down, and Canadians couldn’t access their bank accounts.

An online economy makes it harder for seniors and others who, for a variety of reasons, choose not to use the internet.

It also makes it harder for small independent businesses to survive, artificially pushing more business in the direction of online tech giants (as we saw happen during COVID-19).

There are also major questions concerning how such a currency would affect banking.

In its most extreme form, a central bank digital currency creates a potential path to a China-style social credit system of universal control.

I am a strong proponent of maintaining a hard physical currency. Our leader Pierre Poilievre has been clear: A Conservative Government will ban the Bank of Canada from creating a Central Bank digital currency.

The Bank of Canada should stick to traditional currency and focus on its mandate to bring down high inflation rates that were caused by irresponsible money printing and the Trudeau Government’s reckless spending.

We will be closely monitoring this discussion and any related government proposals.