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Trevor Tombe: Should Canadians fear a central bank digital currency?


Today, we use cash for only about 10 percent of transactions—down from 40 percent ten years ago. Digital options dominate, both here and abroad.

It’s little wonder central banks want to stay ahead. Currently, over 70 countries are exploring the idea of issuing digital currencies—called “central bank digital currencies”. Some have even moved ahead, with 18 countries launching pilot projects and 11 already having them in circulation.

Critics fear such currencies are a new tool for surveillance and control. Just look at the replies to a heavily ratioed tweet by the Bank of Canada seeking public feedback. Concerns include that it would be a “tool for tyrants”, the start of “digital slavery”, a “gateway to misery and coerced obedience”, and more. 

This goes beyond Twitter. Alberta Premier Danielle Smith opposes them and fears it will provide a new way to tax our transactions. And federal opposition leader Pierre Poilievre has committed to banning the Bank of Canada from introducing one.

But what exactly is a central bank digital currency? And should Canadians be excited or fearful? From my perspective: it’s nothing new, far more boring than it sounds, and both proponents and opponents alike are widely missing the mark.

What is a central bank digital currency?

Unfortunately, a clear dispassionate answer to this question is hard to come by. The Bank of Canada’s own video trying to explain the concept falls far short. Yes, it’s a digital dollar. Thanks for that. But electronic payments are nothing new

The critical point is that it’s a digital dollar issued by the central bank. Right now, you don’t get your digital dollars from the Bank of Canada, you get them from banks. That’s different. In our current “fractional reserve” system, commercial banks can create their own money. Each loan they make is effectively just that, and it’s mostly all digital. 

But even a Bank of Canada-issued digital dollar is nothing new. We’ve had them for many years. Currently, there are roughly $250 billion of them right now. We just call it something different: deposits at the Bank of Canada.

Here’s the catch, and the key to understanding most digital currency ideas: neither you nor I have a deposit at the Bank of Canada. Only a tiny handful of large financial institutions do. Even Canadian Western Bank and Manulife Bank have to go through a partner with direct access to the system (they use RBC). 

The best way to think about central bank digital currencies is not as some shiny/scary new thing, but merely as a proposal to broaden access to deposits at the Bank of Canada. That’s it. 

Individual deposits at the Bank of Canada?

There might be benefits for some.

Our system can be complicated for new players, for example. Consider the startup Neo Financial in Calgary. To settle payments, they go through Concentra Bank, which in turn goes through Central 1.If you have not heard of Central 1 before, you’re not alone. They are the backbone of credit unions in B.C. and Ontario, so are important but not visible directly to most of the public. 

Broadening direct access to the central bank may boost FinTech innovation by eliminating this complexity. It might also potentially make it easier for the Bank of Canada to buy and sell assets. They could buy or sell a bond directly with Neo, for example, instead of always with the big direct players.

None of this is really about a newfangled digital currency, though. It’s about improving the wholesale side of our banking system. With billions of transactions worth trillions of dollars, innovations here are potentially valuable and already ongoing.Some CBDC folks talk about “wholesale CBDC”, but I think this is terrible framing and needlessly stokes misunderstanding. In Canada, just call it Lynx 2.0 or something else equally boring.

Risk-free digital dollars already exist

What about individuals? Would access to central bank deposits be valuable? Maybe in some countries, but not Canada.

Each electronic dollar you or I currently hold is not technically backed by the Bank of Canada. It’s instead a liability of the private commercial bank. If the bank fails, you might lose those digital dollars. A “central bank digital currency” would be a liability of the central bank, which cannot fail.Of course, a central bank can dilute the value of your dollars by inflating price levels, but that’s a separate issue.

This might matter in countries where bank failures are a genuine risk. But that’s not Canada.

Our highly regulated and concentrated banking system is, in effect, one with risk-free digital dollars already because all deposits at major banks are fully protected. The worst-case scenario for the big banks is we nationalize them; they are literally not permitted to fail.

Deposits at smaller institutions are also protected. The last time we saw one of them fail was in the 1980s, and every single dollar of deposits was covered—even above the CDIC limit. For the tiny risk that future depositors might lose, the solution is not direct individual access to some direct central bank liability but to simply expand deposit insurance.

Privacy concerns and social control

All this aside, what if we did allow individuals to have a deposit with the Bank of Canada? Would this move us towards a dystopian hellscape where privacy no longer exists and social control is everywhere? Hardly. 

A payments system is little more than sending text messages. An electronic version of asking your bank to transfer some amount from your account to someone else’s. The technical infrastructure that does the job is managed by a government entity and overseen by the Bank of Canada. All transactions are already recorded and tracked. This is not a privacy concern because we have strong legal frameworks and institutions to protect against that. We would (and should!) have the same for any other future innovation that makes payments easier.

If one has concerns about the state of privacy laws in Canada, then make that case directly.

As for social control, some fear a digital currency would be able to punish or reward specific behaviour. But this too is not new! We tax some choices and subsidize others all the time, for better or worse, and have for centuries. Peter the Great didn’t need a blockchain to tax beards

Of course, technology can affect governments’ ability to implement such measures, but each would need to go through Parliament, as it does today. 


At the end of the day, it’s not at all clear what problem proponents of central bank digital currencies are trying to solve. Or even what concretely is meant by the label. Critiques are equally unclear.

There is lots of ongoing research on the topic. And that’s fine. The Bank of Canada is responsible for overseeing Canada’s payments system, so it should naturally be involved in researching new innovations. Private sector firms are too, as they should be.

But most talk of a new digital currency is misplaced. In almost every way that matters, it already exists. Proposals to expand access to it or to improve back-end payments systems is a far more boring—but a far more accurate and helpful—way to think about it.

Joanna Baron: More myths than facts: Unpacking the government’s doublespeak on its internet censorship bill


The CRTC has raised some hackles with an innocuous-looking “Myths and Facts” explainer on the Online Streaming Act (formerly Bill C-11), which recently received Royal Assent after a bumpy two-year road to enactment. The CRTC explainer’s copy could have been lifted from one of Heritage Minister Pablo Rodriguez’s press conferences, casually eliding some of the real sticking points of the bill, which even domain experts are confused about.

One allegation that the government still has yet to answer to it is how tasking the CRTC with a mandate to regulate platforms does not amount to regulating the creators who rely on those platforms to disseminate their content. (It doesn’t help that an amendment intended to shield user-generated content from regulation proposed by the Senate was promptly scrubbed out when the bill returned to the House of Commons.) Yet, right in the first “myth” addressed the CRTC repeats this doublespeak: “We will only regulate broadcasters, including providers of both traditional broadcasting services and online streaming services.” But you can’t regulate platforms without also regulating the content creators who publish on them. One way or another, C-11 empowers the government to wield a direct hand in the content we consume.

The future of what life looks like under the Online Streaming Act is a question of how the CRTC will conduct itself since all of the nuts and bolts of implementation have been left to the regulating body and Cabinet, which will create a policy framework to guide it. The bill delegates the ability to define what Canadian and Indigenous content is, “conditions of service” for online services, and to host consultations on “who should contribute, how much, and how.” Suffice it to say that there will be a long and tedious path ahead before we have a sense of how C-11 will actually function.

Broadly, there are two possible futures under C-11 that we can imagine, one humdrum and probable and the other disquieting and less likely.

The first is that the CRTC’s projected timeline of nine rounds of consultations over the next three years will be dominated by legacy media groups who possess both the budget and organizational heft to dedicate to multiple trips sitting in stuffy committee rooms in Gatineau, with occasional piping-in of smaller creators. They will conclude with milquetoast platitudes about the importance of diversity, representation, and accessibility. Sensitive to the controversy surrounding the bill and accusations of ideological bias, the CRTC will regulate with a light touch.

Still, by 2026 your YouTube home feed will become peppered with glossy yet suspiciously on-the-nose campaigns promoting diversity, intersectionality, and whatever other zeitgeisty terms du jour fit into the Canadian bureaucratic apparatus’ self-concept. Individual creators will occasionally get some attention for pointing out suspicious irregularities in their stats and views, but because big tech platforms Google and Facebook opt to mostly play ball with the CRTC, C-11 will live as something like maple-leaf red tinted glasses on an otherwise normal digital landscape.

The second, admittedly less likely but certainly not impossible scenario, is more ominous. The same legacy-media-dominated consultations take place. The CRTC is energized and influenced by its expanded mandate as well as the government’s clear vendetta against Big Tech and zest for regulation in the name of combatting “misinformation”. It opts to flex its muscle with a thick conception of Canadian content that clearly prioritizes government-friendly messages and sets out to enhance the discoverability of only that content that fits within its ideological priors. Edgier Canadian creators like Gad Saad and Jordan Peterson are effectively shadow-banned. After all, discoverability is a zero-sum game, and content can only be prioritized at the expense of demoting other content. Even less polarizing figures like Hub Dialogues guest J.J. McCullough become harder and harder for new audiences to find.

Unfortunately, there is some evidence that the CRTC decision-makers bear some heavy-handed impulses, beyond their evasive communiqué.

Take, for example, the CRTC’s decision to consider a complaint from EGALE that has asked that Fox News be removed from a list of foreign broadcasters approved for carriage on cable. In its open letter, the LGBTQ advocacy group cited inflammatory and offensive comments made by the now-departed Tucker Carlson on his “famously incendiary” program.

And since the CRTC takes its directives, formally and informally, from the government, the Liberals’ posture and increasing proclivity for censorship are relevant to consider as well. On this front, a recent Parliamentary Question asked by Conservative MP Dean Allison reveals a distinctly muzzled modus operandi. Over the last three years, government has made over 200 attempts to silence social media, including one centred on Sun columnist Lorne Gunter’s reporting on a new proposal at the Immigration and Refugee Board to allow refugee claims based on grounds of “intersectionality.” Gunter was critical of the proposal, arguing that it would allow a wooly and lax standard for would-be refugees. Whatever you think of that argument, it’s undeniably creepy to read that as a result of it, the IRB approached Facebook and Twitter, demanding that the column be taken down because it risked “undermining public confidence in the independence of the Board.”

Neither are concomitant with innovation and growth in the Canadian digital landscape. As we wait and see what C-11 reality we are entering into, be vigilant about what you see in your timelines.