A recent research paper from the Bank of Canada delves into the prospects of a cashless society within the nation and investigates the potential role of a digital central bank currency in addressing payment discrepancies.

Digital currency could mitigate potential downsides

The study concludes that a digital currency could be strategically designed to mitigate potential downsides associated with a cashless society, such as service disruptions or hurdles for individuals who rely on cash for transactions.

However, the ultimate success of a digital currency hinges on broad acceptance by both merchants and consumers, a feat that may prove intricate to achieve, as outlined by the researchers.

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The paper underlines that “attaining extensive adoption, recognition, and use of (central bank digital currency) could pose challenges” and may necessitate substantial and sustained investments from the central bank.

While assuring its commitment to providing cash as long as demand persists, the Bank of Canada also investigates potential shifts in consumer, merchant, and distributor behavior that could lead to reduced cash transactions.

The report contemplates a scenario where cash vanishes and identifies potential unmet payment requirements arising from such an event.

The study recognizes that most Canadians enjoy diverse payment method options, utilizing e-transfers, debit cards, and credit cards. However, a segment of the population still relies on cash, thereby facing potential challenges in a cashless context.

To bridge this gap, the digital currency could be tailored to cater to cash-dependent individuals, even without requiring a bank account. Ensuring robust offline capability during electronic payment outages is also emphasized.

Despite these possibilities, the report acknowledges that encouraging widespread adoption of the digital currency remains a substantial hurdle, especially considering the array of existing payment choices available to consumers.