Deputy Governor Tim Lane said that Canada’s state bank is setting up a framework for introducing a digital currency.

Lane delivered his remarks in Montreal on Tuesday that as Canadians are satisfied with the contemporary payment system, the state bank has started looking at potential characteristics and requirements of digital currency. However, the bank does not face a compelling case to issue a single digital currency at present. The Canadian central bank has also unveiled a document that established plans for a digital currency based on prototype.

Further, owing to preparations for a digital currency for Canada’s central bank, the Deputy Governor said:

“We need to move forward to work out what a potential CBDC might look like and how it could be managed if the decision were ever taken to issue one.” 

Moreover, across the world, central banks are trying to understand the rising payment technologies. Initiatives like Facebook’s Libra are adding insistent necessity to the discussion over handling of digital currencies.

The International Monetary Fund (IMF) and the Bank for International Settlements (BIS) have called for state banks for researching the possibilities that private entities experience by competing units of exchange. A survey conducted by BIS based on 66 central banks showed that about 80 percent of banks were engaged in that activity, up from 70 percent last year. 

There are two possibilities before the Bank of Canada where the bank can decide for the issuance of its own digital currency, firstly, when the cash usage is restricted, and secondly, if other cryptocurrencies were to take a serious invasion

Lane further added: 

“In both scenarios, there would be an argument for the Bank of Canada to step in… The Bank would do this as a trusted public institution, creating an official digital currency that is designed with the interest of the public as its top priority, with no commercial motive.”

Besides, it is not the first time that Bank of Canada forayed into the matter – staff has documented various papers on the severe impacts of issuing a digital currency for the central bank. However, Canada’s central bank is moving towards the development of a prototype. 

“If one or more alternative digital currencies threatened to become used widely as an alternative to the Canadian dollar.” Said the Central Bank of Bank, and added that a digital currency issued by the central bank could be used for defending monetary sovereignty.