Canada may stop using cash
Day-to-day money transactions will become completely digital, but it will not be easy to remove hard currency from circulation at all.
According to a recent Global Payments Report, cash will account for 3% of all transactions in Canada by 2025, one of the lowest rates in the world.
The accelerated adoption of digital technology in financial systems in recent years has largely been driven by the coronavirus epidemic. Since the pandemic began, Canadians have been using virtual, mobile, and online payment transactions with record frequency. The Canadian Payments Methods and Trends Report notes that credit cards remain the primary method of payment in Canada, followed by debit cards.
Over the past five years, the use of cash in everyday transactions has continued to decline. Today, physical Canadian currency in circulation accounts for less than 5% of the total money supply. However, ironically, the demand for cash in Canada is at its highest level in 60 years, despite the massive shift to electronic payments.
The fact is that cash is still the preferred form of savings that gives people a sense of security. Pandemics, geopolitical uncertainty, cybersecurity concerns, and low interest rates encourage Canadians to save in hard currency. With that in mind, Josh Nye an expert at Canada's largest bank, RBC, believes the country is "far from cashless," and "the transition to digital money will not be easy".
Will Canada switch to digital currency?
After the success of decentralized cryptocurrencies such as Bitcoin and Ethereum, which store money but are not subordinate to any government, central banks in various countries are trying to develop their own digital currencies. These should not be confused with electronic currencies. Unlike the latter, digital currencies based on blockchain technology are never converted into physical money. Functionally, it is no different for the user from the way money circulates in payment applications like Wealthsimple Cash, Paypal, Apple Pay.
"A central bank digital currency would be a kind of form of cryptocurrency, but fully backed by the government," Josh Nye explains. — "With such a currency, we wouldn't need blockchain technology, because all transactions would be verified by the Bank of Canada."
The Bank of Canada currently has no plans to issue a digital currency. Nevertheless, Canadian experts are already researching digital systems and business models, working on a virtual version of the Canadian dollar. According to the bank, such a contingency development will help ensure the country's monetary sovereignty, that is, "the ability to control monetary policy and provide services as a lender of last resort". The final decision on the introduction of its own digital currency is left to Parliament and the Government of Canada.
About to move to Canada with cash? Book a consultation with an expert and learn how to immigrate saving your money.
