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“Cryptocurrencies may become a direct threat to our ability to implement monetary policy and lender of last resort (LOLR) role.”

Cryptocurrency use is growing. A July 2018 study from the bank found five per cent of Canadians owned Bitcoin, up from 2.9 per cent the year previous.

The Bank of Canada has been studying digital currencies since at least 2013, when its two-year plan said it would “explore the frontiers of e-money — digital alternatives to cash and their implications for central banks.” More recently, however, the issue has taken on new urgency: in October 2018, a Financial Stability Board working group, chaired by Murchison, released a report on how cryptocurrencies could destabilize the global financial system and what steps central banks should take to avoid it. Since the report’s release, Facebook has announced plans for Libra, and China is poised to launch its own coin.

The time may come that merchants/banks find it too costly to accept banknotes Bank of Canada presentation

International cooperation is cited as a key issue in the presentation: “The incentive to produce a ubiquitous international currency is huge.” The Bank of Canada is already taking steps to work with other central banks on digital currencies. In May, it announced it had conducted the world’s first transfer of a digital currency from one central bank to another, in partnership with Singapore.

Canada is far from the only country exploring a digital currency. Last week, Switzerland’s central bank started exploring the use of digital currencies for trading. Sweden and Singapore both have research efforts underway. China appears ready to be the first to launch, with plans to have its own currency up and running either late this year or early next.

It’s not just countries getting into the digital currency game. In addition to Facebook’s Libra, JPMorgan is already using a digital coin and Vanguard is testing a blockchain-based currency trading system.

The Bank of Canada, by contrast, has been relatively quiet about digital currencies in recent months. In April, deputy governor Timothy Lane spoke at an International Monetary Fund event on the topic. In July, the bank told The Logicit would monitor Libra for potential risks to the financial system, but did not specify any particular concerns.

The Logic