No, Bitcoin Will Not Become Money of the Future

“Bitcoin and similar digital assets were introduced with the hopes of becoming the money of the future. That hasn’t happened, nor is it ever likely to,” said Bank of Canada’s Deputy Governor, Timothy Lane. He spoke at CFA Montréal FinTech and his speech titled, Money and Payments in the Digital Age was focused mainly on central bank backed digital currencies (CBDC) as he shared some thoughts on technological innovations that are transforming the world of money and payments.

Lane acknowledged the fact that technological innovations have truly changed the shape of this planet that is reflected in almost every industry. As a matter of fact Bank of Canada is closely monitoring innovations in the financial sector that could potentially be beneficial to Canadians. It is pertinent to mention here that Bank of Canada was actively involved in exploring the concept of CBDC as it also ran a pilot project with the Monetary Authority of Singapore.

Lane talked about other mode of payments available to public in the form of Apply Pay, Google Pay and even bitcoin. But the regulator isn’t really impressed with the later due its limited use and said ;

“We are all familiar with the explosion of cryptocurrencies over the past few years. Transacting in cryptocurrencies such as bitcoin is just too expensive, and their purchasing power is too unstable.”

The Deputy Governor also talked about Facebook’s Libra crypto currency that the platform wishes to launch sometime this year despite facing heavy criticism not just from the regulators but some mainstream politicians in the form of democratic presidential candidate Elizabeth Warren and even the President of the United States, Donald Trump. He said;

“Libra would run on an existing messaging platform with strong brand recognition. This would give it the potential to reach billions of people—including many with little or no access to banks or financial services. It’s tough to predict if Libra will ever live up to its promises or even come into existence. But it is a good example of a transformative technology that affects how the Bank needs to respond to the future of money.”

It can be understood from the regulator’s statement that the bank consider Libra as a threat, due to the fact that the current banking system lacks smooth transactions in the form of remittances that in many cases are too expensive and said;

“Canadians who have family members in other countries often face high costs and long delays in sending them money. Businesses face similar drawbacks in paying for goods and services they purchase from outside Canada. These frictions and costs have motivated private digital currencies to aspire to make it easier and cheaper to move funds around.”

Bank of Canada conducted a survey in 2017 that asked Canadians how they pay for goods and services and the result turned out about one-third of the respondents use cash for their transactions, compared with more than half just 10 years ago. Now, about 1 in 10 Canadians claims to be entirely cashless.

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The Deputy Governor still believe that cash is resilient and to back this he talked about a mere figurative incident if computer were to shut down or in case of power failure. He also talked about bringing a newly designed $5 bill and said;

“We are actively planning for the design of a new $5 bank note. The Bank is in the midst of a wide consultation process to ask Canadians who they want as the portrait subject of this new bank note.”

He on multiple occasions talked about that the bank is devoted to facilitate Canadians in whatever way it can but never ruled the possibility of central bank backed digital currency in the future and said;

“We have formed a working group with the central banks of England, Japan, the European Union, Sweden and Switzerland, as well as the Bank for International Settlements. We will use this platform to share experiences as we assess potential cases for a CBDC in our home jurisdictions.”

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