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Canada's government and central bank signal renewed focus on cryptocurrencies and CBDCs

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(Kitco News) - The Canadian government announced on Thursday that it has now begun consultations with stakeholders on digital assets – including cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs).

The announcement was part of the Federal government’s fall economic update, which functions as a mid-year mini-budget for the Canadian economy six months after the release of the full annual budget each spring.

The update acknowledged that cryptocurrencies and the digitalization of money “are transforming financial systems in Canada and around the world,” and that the country’s regulatory framework needs to keep up with the changes.

It characterized the digitalization of money as “a challenge to democratic institutions around the world,” citing the use of cryptocurrencies and other digital assets “to avoid global sanctions and fund illegal activities, both in Canada and around the world.”

The 2022 Federal budget, released on April 7, included an announcement that the government would undertake a legislative review of the financial sector, with a particular focus on the digitalization of money and the maintenance of stability and security in the sector.

Yesterday’s announcement comes less than a month after the Bank of Canada (BoC) released a report on Bitcoin awareness and ownership in the country. The report, which covers the period from 2016 to 2021, shows that over 90% of Canadians are aware of Bitcoin, and that Bitcoin ownership increased from 5% of the population between 2018 and 202 to 13% by the end of 2021.

This massive increase in Canadians’ exposure to crypto over the course of a single year, and the subsequent collapse of Bitcoin and other cryptocurrencies, helps to explain the government’s renewed focus on digital assets.

The BoC has also been studying CBDCs since the mid-2010s, releasing a CBDC assessment framework in 2016, and just last month publishing an analysis of archetypes for a potential retail CBDC.

The Bank of Canada is always careful to affirm in all its publications that only “Parliament and the Government of Canada will determine if or when to issue a CBDC.” The fact that CBDCs have made their way into the Federal government’s economic update, and that consultations with public and private stakeholders are already underway, could signal that CBDCs have moved from the research to the planning phase.

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