Bank of Canada: Central Bank Digital Currency Poses No Threat to Commercial Banks
Date: 2024-02-15 Author: Dima Zakharov Categories: CRYPTO PAYMENTS
CBDC and Commercial Banks
A study conducted by the Bank of Canada delves into the potential effects of a central bank digital currency (CBDC) on the landscape of commercial banking. Researchers Jiaqi Li, Andrew Usher, and Yu Zhu focused their attention on how a digital Canadian dollar could influence banking deposits.
Reassurance for Commercial Banks
Contrary to concerns that a state-backed digital currency might lead to disintermediation of commercial banks, the report authors emphasize that banks will remain attractive to consumers due to the variety of financial products they offer.
Consumer Preferences Remain
The study reveals that mortgages and credit cards remain highly popular among Canadians, with a significant percentage choosing their deposit bank for these services. Therefore, the introduction of a digital dollar is unlikely to drastically alter this dynamic.
Limited Impact of CBDC
A CBDC without interest payments, a diverse product lineup, or additional service locations akin to bank branches, is projected to attract only a small fraction of bank deposits. However, if the digital dollar is utilized in Canada Post outlets, it could garner a larger share of deposits.
Mitigating Risks
To mitigate the risks associated with the introduction of a digital Canadian dollar, researchers propose setting limits on its storage. Even with relatively high limits, such as $25,000 CAD, the proportion of liquid assets held in CBDC would decrease.
Public Sentiment
A survey conducted by the Bank of Canada in November revealed that 92% of respondents are not willing to forego cash and bank cards in favor of a CBDC, suggesting a cautious approach to adoption.
