Bitcoin Forum

Bitcoin Pushes Canada Toward State Crypto Coin

You’ve read in these pages of the possible Cryptoruble, Russia’s attempt to stave off bitcoin. The European Central Bank and Swift is also trying to speed up its legacy payments processing in order to slow the popular digital asset’s ascent. But is the world ready for a Bank of Canada, state-backed cryptocurrency? Maple Leaf Coin? Le Coin Poutine? Coin Eh? Hoser Coin? The northern most American government appears headed in that direction.

Canada Central Bank Explores Own Crypto

Central Bank Digital Currency: Motivations and Implications (CBDC), is the title of a thirty page exploration by the Bank of Canada. Authored by Walter Engert and Ben S.C. Fung, the paper begins with the premise bitcoin and its surrounding technology “have raised the possibility of considerable impacts on the financial system and perhaps the wider economy.”

And while Canada is not particularly thought a hotbed of crypto activity, it does boast floppy-haired executive leadership seemingly ready to instruct a college course on quantum computing at a moment’s notice. If that wasn’t enough, the current Prime Minister’s half brother is a well-known bitcoin advocate.

If any country could pull off a state-backed cryptocurrency, it’s probably Canada.

“This paper addresses the question of whether a central bank should issue digital currency that could be used by the general public,” the CBDC paper begins. It’s goal is to arrive at “a benchmark central bank digital currency with features that are similar to cash.”

Pros and Cons

By nature, cryptocurrency enthusiasts are skeptical of government intervention, and especially when it comes to the question of technology undergirding the monetary innovation being used as government tender. Rarely does anyone expect a state currency in this regard to complete openly with the likes of bitcoin, but it probably is, in the end, a way to supplant the decentralize currency altogether.

Indeed, a state-backed cryptocurrency is probably the worst of all worlds. As any bitcoiner worth their salt will explain, bitcoin is not anonymous. In fact, with a few easily obtained parameters, distributed ledgers could be used as the most efficient way ever to track human trade and commercial habits.

To be fair, the CBDC paper poses this question, albeit in a roundabout way. They consider “whether a central bank liability that is accessible to the general public, like cash or [cryptocurrency], is desirable from a social-welfare perspective. Is it sufficient for a central bank to supply only reserves to qualified financial institutions? Put differently, is a
‘cashless society’ a sound outcome?”

A major concern beyond power-loss is seigniorage, the profit central banks make off of their currency monopoly. Bitcoin represents a serious challenge to it.

Perhaps as a way to preempt such a loss, it’s own cryptocurrency just might get a few more birds with that one stone: a viable alternative to bitcoin and the possibility of having “no transaction fees charged by the central bank, the benchmark [cryptocurrency] would probably be less expensive for merchants than cash and credit cards,” the CBDC guessed.

The report was quick to pivot, however, underscoring itself as only a suggestion and not officially policy. It also was keen to warn cryptocurrencies and distributed ledgers are so new that every precaution should be taken prior to rollout.
https://news.bitcoin.com/bitcoin-pushes-canada-toward-state-crypto-coin/

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This is destroying the purpose of cryptocurrency IMO. Cryptocurrency supposed to be decentralized. It's pointless to create state-backed cryptocurrency since people want decentralized and which is government cannot be penetrate.

I recently read an article somewhere that posed a hypothesis that is somewhat related to this.
The author argued that even if Bitcoin won´t succeed in the future, the introduction of Bitcoin
will nevertheless have beneficial implications for people all over the world, because it may force
fiat currencies to improve as well.

If cryptocurrencies pose a competitor to central banking it is entirely possible that central banks will have to
change some of their current policies (e.g. don´t siphon off as much of the productivity increase through
seigniorage as they are doing now ).

I'm becoming sceptical about all this "national cryptocurrencies". There were many news about Russian and UAE (Dubai) national cryptocurrency back in October but nothing worth mentioning happened since than.

Government/National cryptocurrencies are all bound to be failures!
Nothing good can come of them.

I've read these kinds of news every since bitcoins started to get famous, but really it has never happened. I've been reading that crypto-ruble or crypto-yuan or crypto-yen, but really, not one of them ever came through. In fact, there have been also a lot of news that a country or even banks and other industries are going to adopt a blockchain technology, but never did those too push through. So, I don't think this news about Canada will come true either or likely it will not be in the near future.

And not only Canada is considering such a question. Why not instead of all wishing to do its own crypt, will not take advantage of the already existing Bitcoin. Why change one crypto currency for another? if you can use Bitcoin

Funny thing is that even the local government here is looking to develop its own state-tied coin, but it won't be anything in digital form, despite people having complained about that. It's a physical form of money purely meant to give people more incentive to spend money within the state rather than going elsewhere to get things cheaper, etc. It's basically very similar to the Brixton Pound since its purpose is to stimulate the local economy, but without really being exposed to the drawbacks of the current fiat system. At least, that's how they portray their plans. Not sure whether or not they got tempted to set this up due to crypto currencies gaining popularity, but at least it shows that we're not the only one looking to distant ourself from the current system.

Bitcoin doesn't allow governments to have the same level of control compared with how things will be when they launch their own centralized crypto coin. In this case, they will more than ever be in control of people's wealth than ever before. Imagine how things must be when governments can instantly freeze your funds, or just decide to give people a haircut similar to how things have been in Cyprus years ago. They can also block services in the way that you can't spend your money there anymore. It's like you are nothing more than a slave of the government (more than already is the case). That's definitely not something to look forward to.

I don't expect anything big from them either. Governments starting their own cryptocurrencies will always be built in their advantage, hence cancelling out the dencentralization aspect (which has become a must for the average cryptocurrency). And even if they're still working on them do you really expect them to publicly display their progress or make their projects open source? That would only allow for other nations to replicate their model.

This year, many countries have announced the creation of their own crypto currency, but no country has ever released them. Was the Expert Council under the government of the Russian Federation right that made the conclusion that it is impossible to create a national crypto currency in a single state? I would still like to look at the functioning of such a national crypto currency, how successful it will be, whether it will mass out of the state and how such a crypto currency will interact with decentralized crypto-currencies. Can create such a national currency will Canada?

We do understand that a state-issued and controlled cryptocurrency would not amount to anything. These coins are just their own national currencies in digital form. Now, where would the excitement be coming from? Remember that Bitcoin got into the scene all because the coin achieved a critical mass of buyers and holders who are excitedly into the whole thing.

These and other state-sponsored cryptocurrency projects are all bound to fail or if they could succeed the market coverage would just be small. We could not expect people who are supporting the real cryptocurrency platform to be excitedly supporting these state cryptos...no not now and not even in the future. There is no future for these state coins.