A recent Bank of Canada discussion paper reveals that most Canadians have little reason to use a central bank-issued digital currency (CBDC) due to their easy access to financial services.
According to a report published by CoinTelegraph, the Bank of Canada released a staff discussion paper on August 10th, examining a hypothetical scenario where cash was virtually eliminated to assess the role a CBDC could play in aiding the underbanked population. The study found that Canadians have "weak incentives" to adopt a CBDC, as they already have ample access to financial services, with 98% of adults holding a bank account, 87% owning a credit card, and 90% of households enjoying high-quality internet access.
The paper suggested that replacing cash with a digital currency could result in fewer payment options for tech-averse individuals and would leave cash-dependent Canadians unable to make everyday payments. Moreover, the low adoption rates of a CBDC could discourage merchants from accepting it, further reducing its utility.
Instead of a CBDC, the paper proposed alternative solutions for supporting the underbanked, such as improving internet access, expanding the availability of low-cost bank accounts, fostering merchant collaboration in remote communities, and continuing to supply cash.
The paper emphasized that it was not forecasting Canadians' reaction to a CBDC and acknowledged that more people may be interested in using one for various reasons. However, it noted that the barriers to widespread adoption of a CBDC by users and merchants "appear to be significant."
The Bank of Canada also highlighted the ongoing importance of cash, stating that without it, there would be no offline payment options during emergencies like extreme weather events or power outages. The study reinforces the central bank's commitment to providing cash accessibility and issuing it as long as demand exists.