The Governor of the Bank of Canada has called for greater international cooperation in the development of central bank digital currencies (CBDCs). Speaking to Reuters, Tiff Macklem said that a “globally coordinated” approach was necessary in order to prevent digital fiat currencies being used by criminals.

Such concern can be said to be warranted. A central appeal of CBDCs expressed by many central bankers and state institutions across the world in the past two years are their transparency and traceability. An internal presentation to senior figures at the Canadian central bank in 2019 argued that a digital Canadian dollar would not only make fraud harder for criminals but also facilitate tax collection for the wider Canadian populace.

Macklem added: “If another country has one and we don’t, that could certainly create some problem. So, we want to make sure we’re ready. Currencies move across borders, and so we certainly wouldn’t want to be surprised by some other country.

“It will be important for us to share information on what each of us is doing, is planning on and on the timeline that we might do it on.”

In some ways, Macklem is both warning against and calling for situations which already exist. The People’s Bank of China (PBoC) has vowed to make China the first major developed nation with a digital fiat currency. In contrast, Federal Reserve Chairman Jerome Powell recently outlined his “wait and see” approach to a possible digital US dollar, saying: “It’s more important to get it right than to be the first.”

At the same time the central banks of Switzerland, Sweden, Japan, the United Kingdom and the eurozone are already working in conjunction with the Bank of Canada, sharing the results of their individual CBDC research and development projects.

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