April 30, 2014 8:15 pm

Bank of Canada not worried Bitcoin will replace cash

This April 3, 2013 file photo shows bitcoin tokens in Sandy, Utah.

AP Photo/Rick Bowmer, File

OTTAWA – The Bank of Canada is not worrying about the bitcoin phenomenon. Not just yet anyway.

In testimony before the Senate banking committee, the bank’s top policy officials said it was too early to tell whether digital currencies such as bitcoin will catch on in a big way.

“These are early days … and so far digital currencies have not made it to what we call money,” said governor Stephen Poloz.

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“We’ve got a ways to go before we need to be thinking about policy implications,” Poloz added, although he said bank officials have been tasked to follow the virtual money.

READ MORE: IRS says virtual currencies to be taxed like property, not currency

His second in command, Tiff Macklem, on his last day at the central bank, concurred, saying the potential implications for monetary policy seem at present speculative and far into the future.

Bitcoin is not in position to threaten the official, regulated money supply and may never be, he said.

“I started with the bank in 1984 … and through my entire career at the bank the demise of cash has been much predicted,” he noted.

“Cash has been remarkably durable, even with the introduction of credit cards and debit cards and tap-and-go cards. If you look at the growth of cash in the economy, it’s grown roughly in line with the growth of nominal income.”

READ MORE: 16×9: An investigation into Bitcoin’s remarkable rise

Bitcoin has been described as a virtual currency which is traded online and requires no central authority. A major advantage is that it also requires no transaction fees, but the unregulated nature has left it vulnerable to scams and spectacular failures, such as the recent mysterious disappearance of a major bitcoin exchange and with it hundreds of millions of virtual dollars belonging to clients.

Macklem said if digital currency were to catch on in a big way, it would effect the central bank’s balance sheet and it’s ability to regulate the money supply and financial stability.

“But that seems pretty far off,” he said.

Still, the outgoing senior deputy says there are some useful elements to digital currencies and warned that while authorities may need to devise regulations to protect consumers, these should not be so onerous as to stifle innovation.

“There are certain applications of some sort of global currencies which could be quite helpful, for instance payments of remittances, which can be quite expensive,” he explained.

© The Canadian Press, 2014

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