Key Insights:
- The Bank of Canada is scaling down its work on a retail CBDC and shifting its focus to payment system research.
- Retail payments will see increased supervision under the Retail Payment Activities Act, affecting over 2,500 small providers.
- Research on retail CBDC will continue if Canadian authorities deem it necessary.
Bank of Canada Shifts Focus From Retail CBDC to Payment Systems
The country’s authority has revealed that its focus has changed; in other words, it plans to focus less on the CBDC retail side. This move fits the central bank’s priorities better by leaving the more pressing matters of payment system regulation/development to it. A statement on the BOC’s website about CBDCs states that while central bank digital currencies will remain of interest for future research, further work will focus on improving payments infrastructure in the country.
Increased Focus on Payment System Regulations
Though timely, the central bank’s work on the retail CBDC will undoubtedly be diminished in the coming months, given that it will have other responsibilities ahead. It will soon regulate retail payments through the Retail Payment Activities Act 2021, which has recently been passed. This act requires you to authorize around 2500 small payment service providers who before operated on anti-money laundering rules only. The new global standard in operational risk is expected to be implemented by 2025, which Canada views as a shift in payment regulation.
The Role of Payments Canada
The association through which Canada’s national payment clearing and settlement system is run is Payments Canada, and it continues to be a key driver of this change of guard. In partnership with the Bank of Canada, it is also expanding its retail real-time rail service to customers who need non-transaction-needs payment services. This payment system aims to increase the flow of transactions by developing pay in the country. Instead, as it steps back from its CBDC efforts, the Bank of Canada is expected to oversee and steer this development.
CBDC Research Takes a Backseat
While the BOC is reducing its efforts on a retail CBDC, it recognizes that it needs to keep what it calls a “backup plan” in place. The company has researched with organizations such as the Bank for International Settlements and MIT Digital Currency Initiative. For some time, the BOC has been saying Canadians have no demand for a retail CBDC. Still, it argues that the research will be useful if, say, down the line, Canadians request a sovereign digital currency through their legislators.
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