Canada does not require a central bank digital currency (CBDC) to preserve its monetary sovereignty from the United States. Instead, the country should embrace digital competition through private-sector stablecoins, argues Alex Tapscott in a recent Financial Post article. While many policymakers assume a state-run digital loonie is necessary to counter the rise of U.S.-dollar-backed stablecoins, this assumption is misguided.
The Case Against a CBDC
Opponents of CBDCs often highlight concerns over privacy and government overreach, warning that such currencies could become tools of surveillance. However, a more pragmatic issue is that a Canadian digital dollar would arrive too late and offer less utility than private alternatives already in development. For instance, Tetra Digital Group has launched CADD, a regulated Canadian-dollar stablecoin.
In a world of open, programmable financial networks like Ethereum, a state-run system risks appearing outdated. While CBDCs could reduce friction and drive efficiencies, they imply that governments and large banks should control the next generation of financial infrastructure. Yet, innovation historically stems from new entrants and ideas.
Monetary Sovereignty Concerns
Policymakers worry about preserving Canada's monetary sovereignty amid U.S.-led digital finance. However, by the time Canada designs and deploys a CBDC, the market will have evolved. Stablecoins like Circle's USDC are already scaling globally, popular on platforms such as Wealthsimple and Shakepay, and embedded in payments and decentralized finance.
Canadians have not feared the U.S. dollar replacing the loonie in daily transactions, as seen in Argentina. But in a flat world where money moves instantly via blockchain, the issue warrants attention, especially given U.S. trade aggression.
The Stablecoin Act
Canada already has a plan: the Stablecoin Act, part of Bill C15, establishes a regulatory framework for stablecoins. It includes a registration regime, mandates at-par redemption, and places oversight with the Bank of Canada. The goal is to promote safe innovation and competition while protecting consumers.
The United States has chosen its path with the Genius Act, creating a clear framework for private stablecoins. U.S. dollar stablecoins now exceed US$300 billion in circulation globally. European policymakers warn that these could threaten their monetary sovereignty, a lesson Canada should heed.
Rather than a CBDC, Canada should foster private-sector competition. A yield-bearing Canadian stablecoin could differentiate the loonie in foreign exchange markets, driving demand. The focus should be on enabling innovation, not building a state-run digital currency that may become obsolete.
