The Bank of Canada recently shared insights regarding the potential implications of introducing a central bank-issued digital currency (CBDC) for the average Canadian. In a paper released recently, the bank plans for a future where CBDC would be used in most transaction settlements instead of physical cash.
However, Canada’s apex bank made an intriguing discovery: “Most Canadians have little motivation to embrace a CBDC, given their access to conventional financial services like bank accounts and credit cards.” The study further revealed that 98% of adult Canadians possess a bank account, while 87% own a credit card.
Furthermore, 90% of households enjoy reliable access to high-quality internet services.
Navigating The Path To CBDC Adoption
While the CBDC could be a lifeline for specific demographic segments, such as the underbanked, it is not without reservations. For instance, individuals who are not tech-savvy might find it challenging to adapt to a reduced range of payment options.
Similarly, those relying heavily on physical cash could encounter difficulties with routine transactions. Moreover, if the CBDC is met with limited adoption, merchants might display reluctance in accepting it, thereby undermining its practicality.
The paper suggests that alternative strategies could yield more effective outcomes in assisting the underbanked. Some suggestions include enhancing internet accessibility, expanding the availability of low-cost bank accounts, forging partnerships with businesses in remote areas, and ensuring a steady supply of physical cash.
Meanwhile, the paper also underscored the significance of physical cash, especially during emergencies when offline payment methods prove indispensable.
Central Banks’ CBDC Initiatives On The Rise
Despite being confronted with various challenges, one notable concern is the CBDC’s viability in offline scenarios. To address this, Samsung recently announced a collaboration with South Korea’s Central Bank.
Their joint efforts aim to enhance the CBDC’s usability in offline settings, demonstrating a commitment to improving its real-world applicability. Though some Canadians may identify reasons to embrace the CBDC, the paper acknowledges that widespread adoption could face hurdles.
From a global context, multiple studies revealed that most Russian citizens lack confidence in the digital ruble. Consequently, the Russian government has embarked on a collaborative venture with 13 banks and a select group of clients.
This initiative seeks to refine retail payment options, facilitate seamless person-to-person transfers, streamline cross-border transactions, and optimize automated payments. Like Canada, CBDC adoption faces similar issues globally.
According to a recent Bank for International Settlements (BIS) survey, 93% of central banks worldwide are actively exploring CBDC initiatives. This momentum is expected to result in the circulation of nearly 15 retail CBDCs globally before the year ends.