A cryptocurrency issued by Canada's central bank could benefit the economic well-being of Canada and the United States.
In a report released Thursday, Central Bank of Canada economist Mohamed Davudalhosseini argues that issuing a digital currency by the central bank "could lead to an increase in consumption of up to 0.64 percent for Canada and up to 1.6 percent for the U.S., compared with using cash only."
For now, Davudalhosseini says, the main question for "many" central banks that are currently considering issuing a digital currency is whether coexist between cash and a digital form of fiat currency, and if so, how to maintain optimal monetary policy.
Based on detailed modeling and mathematical calculations, the researcher argues that the economic well-being of a country - at least for Canada and the United States - could improve if cash is replaced with digital money, provided that implementation is not extremely costly.
“The simultaneous use of cash and digital money by agents (consumers) sometimes leads to to lower welfare than in cases where only cash or only digital money is available. This fact suggests that removing cash from circulation will increase welfare if the purpose of introducing digital money is to improve the effectiveness of monetary policy."
The paper goes on to say that by introducing digital money, central banks have more room to maneuver when adjusting current monetary policy.
"This is because the central bank can control the digital money portfolios of agents and can cross-fund different agents, but these actions are not possible if agents use cash," - the statement said.
The paper's findings echo those of other researchers in December 2017, whose report examined the feasibility of replacing cash with digital money and described in more detail the pros and cons of such a replacement. At the time, the researchers argued that the potential benefits of digital national money could vary depending on the country's level of development.
According to coindesk.com
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