Bank of Canada: Bitcoin Could Create 'New Monetary Order'

Central banks would "struggle" to implement monetary policy if digital currencies become more widely used, according to a Bank of Canada official.

AccessTimeIconNov 16, 2015 at 4:35 p.m. UTC
Updated Sep 11, 2021 at 11:59 a.m. UTC
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.
Consensus 2023 Logo
Join the most important conversation in crypto and Web3 taking place in Austin, Texas, April 26-28.

Central banks would "struggle" to implement monetary policy in a world where digital currencies are more widely used, a senior official from the Bank of Canada said in a speech last week.

During an appearance at the Rotman School of Management and Munk School of Global Affairs in Toronto, senior deputy governor Carolyn Wilkins spoke about innovation and the changing face of central banking in a post-financial crisis world.

Wilkins pointed to bitcoin as part of a landscape of alternative financial technologies and concepts that she said are pushing more and more financial activity "outside the traditional financial sector".

She said in the speech:

"This would create a new dynamic in the global monetary order, one in which central banks would struggle to implement monetary policy. And, central banks couldn’t act as lenders of last resort as they do for their own currencies. This means that households and businesses could suffer important losses if such an e-money were to crash."

"We need to anticipate this and manage the risks and benefits that could arise from the broader adoption of e-money," she concluded.

Last week’s speech wasn’t the first by Wilkins to address bitcoin. Wilkins said during a speech last year that the Bank of Canada was watching industry developments "closely", and that one possible outcome of the technology is a reduction in capacity to conduct central bank policy.

"In the unlikely situation in which cryptocurrencies were used broadly, a significant proportion of economic transactions would not be denominated in Canadian dollars," she said at the time. "This would reduce the bank's ability to influence macroeconomic activity through Canadian interest rates."

The comments echo those that have been formally issued by Bank of Canada itself, as the central bank said last year that digital currencies may pose a threat to central bank stability.

Image via Shutterstock

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.


Learn more about Consensus 2023, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.