For a while, Canada was one of the many countries on edge about going crypto. Last month in a Reuters interview, Bank of Canada Governor Tiff Macklem had made a Central Bank Digital Currency (CBDC) a possible plan B as he did not believe it was an urgent need.
What kept Mr. Macklem on edge was the competition and the lack of it at the time. In his November interview Mr, Macklem said that not having a CBDC would only be a problem if a country they traded with had CBDC.
Canada had set up a contingency plan with its G7 partners.
Canada had launched the research project back in 2017 and involved R3, Accenture, the Monetary Authority of Singapore, J.P. Morgan Chase, and the Bank of England.
The country was also recruiting candidates to undergo their project. Canada was on the verge of creating CBDC’s and something tipped them all the way.
In February, Timothy Lane, the Deputy Governor of Canada, who said in an interview that Canada did not need to turn to CBDC is now saying they are launching a CBDC.
In February, Mr. Lane said that two main factors would prompt the country to turn crypto, and one was fulfilled.
The first condition that Mr. Lane. stated was that if cryptocurrencies were becoming too popular, they would have to launch a CBDC. A rise in popularity of the crypto coins would be an issue because it would be a threat to the Canadian dollar.
Canadians are becoming less dependant on cash because of the pandemic. The cryptocurrency exchange Coinsquare has over 200,000 users.
Interest in cryptocurrency usage in Canada has been growing over time. In December 2017, a study found that five percent of Canadians bought cryptocurrency. By 2018 the number of people who had brought cryptocurrency in Canada was 16.55 percent.
The growth in popularity of crypto has pushed Canada to launch a CBDC even though this behavior could change once the pandemic is over because there is more at play here.
The threat of the USA
The second factor that Timothy Lane stated was that Canada would go crypto if China goes cashless. So far, China has launched a digital yuan, and it is performing well.
China has not gone entirely cashless but the threat of the USA joining China is too much. Thanks to the acting Comptroller and the new Wyoming senator of the USA, the US could quickly launch a CBDC.
The acting Comptroller of the Currency Brian Brooks in late October mentioned that more banks were looking at digital currencies in the US, and he was an avid encouraged of the crypto path. The newly elected Wyoming Senator, Cynthia Lummis, blasted about Bitcoin on ABC, suggesting that it was a great store of value last month.
Canada would not want to catch up with some of its biggest traders, so it is taking action and beating the USA to the CBDC path.