Bank Of Canada: CBDC Can Assist With Financial Inclusion As Cash Usage Declines

The Bank of Canada believes a Central Bank Digital Currency (CBDC) can play a transformative role in enhancing financial inclusion. 

A Central Bank Digital Currency (CBDC) is a digital form of a country’s national currency that is issued and regulated by the country’s central bank. Unlike cryptocurrencies like Bitcoin or Ethereum, CBDCs are not decentralized and are typically backed by the full faith and credit of the government.

CBDCs are designed to be a digital representation of the national currency, just like physical banknotes and coins, but in electronic form. They are often built on blockchain or distributed ledger technology, which provides security and transparency.

One of the standout revelations from the report, titled “Redefining Financial Inclusion for a Digital Age: Implications for a Central Bank Digital Currency,” is the decline in cash usage in Canada. There is also marked preference for cards and digital payments. 

Traditional metrics, such as access to bank accounts or the internet, have often been the yardstick for measuring financial inclusion.

Sign Up For The TDR Newsletter

However, the paper argues that these metrics might not capture the intricate challenges individuals face, especially in the realm of trust and financial literacy.

Discrimination faced by certain communities, notably Indigenous and Black Canadians, in financial institutions can deter them from accessing traditional financial services.

Digital inclusion, ensuring equitable and safe access to digital technologies, is highlighted as a pivotal factor.

While urban areas in Canada enjoy robust digital connectivity, the report emphasizes the significant challenges faced by remote regions, especially Indigenous communities.

The potential introduction of a CBDC, with provisions for offline digital payment solutions, can be a game-changer for these areas.