The budget committed $17.7 million over five years to fund a review that will consider, among other things, the need for a central bank digital currency (CBDC) in Canada.
A number of countries are exploring the potential of CBDCs, with the idea that their development could improve payment systems, foster financial innovation and improve inclusion, while potentially reducing credit and liquidity risk.
However, there are also concerns that the introduction of CBDCs could undermine bank deposits, which are a traditional source of bank funding; while reducing bank revenue from payment processing.
Moreover, it is not clear how the presence of digital dollars could affect the financial system in the face of a credit or liquidity crisis. They may also give rise to other new risks, such as increased cyber risk.
In addition to its review of CBDCs, the government said the review will also look at how to adapt the financial sector regulatory framework to address the risks posed by the digitization of money; and how to maintain security and stability in the financial sector as these emerging technologies develop.
“The first phase of the review will focus on digital currencies, including cryptocurrencies and stablecoins,” the government said in today’s budget.
The budget also reiterated the federal government’s commitment to amend financial sector legislation to overhaul the banking sector dispute resolution regime.
Specifically, the government has indicated that it will introduce amendments to “provide for a single non-profit external complaints body (ECB) in the banking sector and to strengthen the ECB system”.
The measure is intended to address concerns about the existing system, which allows for competition in the handling of complaints, allowing banks to choose whether customer complaints that cannot be resolved internally should be referred to the Banking Ombudsman and (OBSI) or the ADR Office of the Chambers Banking Ombudsman (ADRBO). Currently, four of the Big Six banks use ADRBO, while only two (along with a range of smaller institutions) remain members of OBSI.
Last year the Ministry of Finance carried out a review of the existing ECB system, which led the government to conclude that reform was needed to establish a single, independent ECB to handle consumer complaints. This commitment has now been incorporated into this year’s budget.
“Canadians deserve a fair and impartial process to resolve unresolved complaints with their banks,” the government said in today’s budget. “Banks should not be able to choose which complaints body they participate in, and the system should not be run for profit.”