The Bank of Canada has begun to experiment with blockchain in order to create its own cryptocurrency. This new digital asset might be of great help to police and prosecutorial bodies.
Many institutions, companies and organizations claim that cryptocurrencies may be a threat, and thus they should be treated with caution. The Bank of Canada knows it, which has led it to consider creating its own cryptocurrency. This new digital asset offers the same advantages that can be found in all others, but providing greater security.
Reasons for Creating the Cryptocurrency
On Wednesday, October 16th, it was reported that the Canadian central bank is experimenting with blockchain technology with the objective of lunching its own cryptocurrency. Supposedly, the reason for this is the institution’s belief that creating a public cryptocurrency can be an excellent way to combat the danger posed by existing cryptocurrencies.
This was stated in a document entitled Central Bank Money: The Next Generation, which was addressed to Stephen Poloz, Governor of the Bank of Canada. It should be mentioned that the document expressed the bank’s need to innovate in order to stay in the game. This new CBDC (central bank digital currency) would be supported by the central bank and have the convenience and security that electronic payments deserve.
What the Cryptocurrency Will Offer
Like any other cryptocurrency, it will offer the possibility of making long-distance payments efficiently and securely. However, it will also provide greater security, since it is a token that will be supported by a recognized financial institution.
The document also stated that transactions conducted with this cryptocurrency might be monitored by security authorities. In this way, the risk posed by cryptocurrency operations will be combated, since the information on the transactions would be supported and shared with police and tax entities.
Investing in the New Cryptocurrency
Although it is not exactly a cryptocurrency, since it is a CBDC, it might become a good means of investment.
It is worth mentioning that, it will very probably be designed as a stablecoin so that it will maintain a stable price. Therefore, it would not present as much volatility as common cryptocurrencies. However, it is important to clarify that they are assumptions, since the institution has not provided official statements in this regard.
Effects on the Crypto World
These statements represent a positive impact for the crypto world as, with the creation of new cryptocurrencies with other qualities, their concept will evolve. However, this is not the first or only proposal of a CBDC, since the Bank of China had already announced that it would experiment with blockchain and launch its own cryptocurrency.
Therefore, other countries will very probably start experimenting with similar projects. This situation would increase investment options, as well as improve payment systems using blockchain.
Probability that Cryptocurrencies Are Threatened
Although the new CBDC of the Bank of Canada is used by many people, both through the payment system and to invest, this proposal will not pose a threat to either Bitcoin or the other existing cryptocurrencies. The reason for this is that Bitcoin, Ethereum, Ripple and the other cryptocurrencies have already proven to be reliable. Additionally, their payment platforms are already extremely efficient.
Therefore, the only thing that will change in the paradigm is that there will be new options to be taken when needed, which is certainly favorable. However, it was mentioned that the cryptocurrencies that are already on the market will not be affected in any way.
By Willmen Blanco
