Bank of Canada Reports on 2020

The COVID-19 pandemic saw payment behaviour deviate markedly from historical trends. Unsurprisingly this features heavily in the Bank of Canada’s 2020 annual report. On one hand it put pressures on its cash inventories as the Bank moved fast to boost stocks at its regional distribution centres. Its operations centres had to respond with agility and to innovate to ensure cash supply was uninterrupted.

The Bank commissioned research to understand the risks of cash payments in the pandemic. It found that cash payments are no riskier than touching other common surfaces and so urges retailers to continue to accept cash. This is a headline on its website.

The change in payment behaviour prompted the Bank to carry out extensive research to understand the changes, and the report says that this will feed into its Central Bank Digital Currency (CBDC) research.

At the moment the Bank does not see a compelling case for CBDCs, but it is doing extensive work to be ready should one be needed. It is working with policy makers, and financial institutions and other central banks on this, including collaborating with six other central banks on a Bank for International Settlement October 2020 paper, ‘Central Bank Digital Currencies: Foundational Principles and Core Features’. This looked at the underlying principles and core features of a CBDC and how they can help deliver public policy objectives.

The Bank will continue in 2021 both its cash use and its digital currency research.

The Bank is planning a new $5 banknote. It received 600 qualified submissions suggesting iconic Canadians to put on the note when it asked the public at the start of 2020. It reduced that to a shortlist of eight and a panel is now considering the options. The decision will be announced in 2021.

The Bank has also formed an Indigenous Advisory Circle to guide it on how to ensure designs represent the indigenous population appropriately.

Just as it is looking to introduce a new $5, on 1 January 2021 five denominations lost their status as legal tender – the $1, $2, $25, $500 and $1000. None of these have been issued for some years. The change was made in 2018 with amendments to the Bank of Canada Act and the Currency Act. The Bank supports this move that helps ensure notes in circulation are current, secure and easy to use.

The Bank continues to research new note technology and will do through 2021 as well. The counterfeiting level is 8ppm, well under its target of 30. In 2021 the Bank will adopt a new counterfeit deterrence model in partnership with law enforcement agencies.