Hype can be bad. Overhype can be embarrassing. Do you remember when segways were supposed to flip transportation, urban life, and life as we know it on its head in the early 2000s? Well, we all know how revolutionary that turned out. You could argue there’s a great deal of hype surrounding Bitcoin: you could be stuck in your computer chair for hours as you read every article with the term “Bitcoin Revolution” in it.
Revolution, evolution, hype, whatever. For the Bank of Canada, the threat of digital currencies overtaking fiat money remains hype for now. Stephen Poloz, governor at the central bank and speaking before Canada’s Senate Banking Committee, expressed how “These are early days… and so far digital currencies have not made it to what we call money.”
Poloz added “We’ve got a ways to go before we need to be thinking about policy implications.”
Furthermore, BOC Senior Deputy Governor Tiff Macklem said that the bank would have to regulate the money supply if it gains enough support, although “that seems pretty far off.”
Macklem elaborated on his opinion: “I started with the bank in 1984 … and through my entire career at the bank the demise of cash has been much predicted. 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.”
That’s not to say he doesn’t see any benefit in digital currencies: “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.”
Bitcoin’s traction has been steadily increasing in Canada and the government has taken notice. Last year, the Canada Revenue Agency required citizens to pay taxes on all bitcoin transactions. In February 2014, Quebec’s securities commission announced it would prosecute bitcoin businesses violating the Securities Act, Derivatives Act, and Money Services Businesses Act in reaction to Canada’s first bitcoin ATM. Less than a week later the federal government announced its amendments to legislation to prevent bitcoin from being used in money laundering and terrorist financing.
As Bitcoin becomes too large to ignore, the Bank of Canada foresees a lengthy amount of time for it to make a serious splash in the bucket, let alone overtake fiat currency. As the bank continues to monitor cryptocurrency’s progress, it’s safe to say this hype is not unfounded.