In today federal budget, the government announced plans for a review, led by the Department of Finance, which will examine the so-called “digitalization” of money and its possible impact on the traditional financial sector.  The budget pledged $17.7 million in funding over five years to finance a review that will, among other things, consider the need for a central bank digital currency (CBDC) in Canada.

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A number of countries are exploring the potential of CBDCs, with the idea that their development could enhance payment systems, foster financial innovation and improve inclusion, while potentially reducing credit and liquidity risk.  However, there also concerns that the introduction of CBDCs could undermine bank deposits, which are a traditional source of bank funding; while also cutting into banks’ revenues from payments processing.  The government said that the review will also consider how to adapt the financial sector’s regulatory framework to deal with the risks posed by the digitalization of money; and, how to maintain the security and stability of the financial sector amid the development of these emerging technologies.

“The first phase of the review will be directed at digital currencies, including cryptocurrencies and stablecoins,” the government said in today’s budget.

Bank dispute resolution overhaul

The budget also reiterated the federal government’s pledge to amend financial sector legislation to overhaul the banking sector’s dispute resolution regime.

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Specifically, the government indicated that it will introduce amendments to “provide for a single, non-profit external complaints handling body (ECB) in banking and to strengthen the ECB system.”

“Canadians deserve a fair and impartial process to address unresolved complaints with their banks,” the government said in today’s budget. “Banks should not be able to choose the complaints handling body they participate in, and the system should not be run on a for-profit basis.”

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