The Digital Loonie: The Legal Framework for a Central Bank Digital Currency in Canada and Beyond

Author ORCID Identifier

Poonam Puri: 0000-0003-3233-5019

Document Type

Book Chapter

Publication Date

2024

Source Publication

Zatti, F., & Barresi, R.G. (Eds.). (2024). Digital Assets and the Law: Fiat Money in the Era of Digital Currency (1st ed.). Routledge.

Keywords

Economics; Finance; Business and Industry; Law; Politics and International Relations

Abstract

Central banks are increasingly contemplating the creation of digital sovereign currency. It would be legal tender, like the conventional coin and note, to preserve control over the financial sector and create a payment system that is flexible enough to adapt to social shifts. In developing, issuing, and maintaining such a central bank digital currency, however, central banks and other financial regulators face myriad legal challenges and considerations. As this chapter will show, most of the legislative framework needed for a central bank digital currency already exists in a Canadian context. However, significant amendments will be required to existing statutes. Canadian regulators must be concerned about money laundering, financing terrorism and fraud, investor protection, security, and privacy. Each of these legal issues will require legislative amendments and regulatory changes. Privacy and security are of particular concern, as individual consumers must trust central bank digital currencies as a reliable payment method. There will need to be international legal coordination and convergence on these legal issues. The legal challenges Canada works through in real time are similar to those explored by other central banks. This chapter will therefore be instructive for non-Canadian readers, drawing heavily on the international context.

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