Bank of Canada: Bitcoin will create a 'new monetary order'

     A senior Bank of Canada official said in a speech last week that the central bank will "work hard" to implement monetary policy at a later date.

     At the Rotman School of Management and the Munk School of Global Affairs in Toronto, Senior Deputy Governor Carolyn Wilkins spoke about innovation and how central banks have changed since the global financial crisis.

     Wilkins pointed out that Bitcoin is part of a wave of alternative financial technologies and concepts that are driving more and more financial activities "out of the traditional financial sector."

She said in her speech:

     “Central banks will struggle to implement monetary policy, which will breathe new life into the global financial order. Moreover, central banks cannot act as lenders of last resort. This means that households and businesses could suffer huge losses if electronic money collapses.”

“We need to anticipate and manage the risks and benefits that may arise from the wider use of electronic money,” she concluded.

     Last week’s speech wasn’t the first time Wilkins has spoken about bitcoin. Last year, she said in a speech that the Bank of Canada was watching the industry closely and that one possible outcome of the technology was that it could reduce the central bank’s ability to make decisions.

     “If cryptocurrencies become widely used, a large portion of transactions will not be in Canadian dollars,” she said at the time. “This will reduce the Bank of Canada’s ability to regulate the economy by adjusting Canadian interest rates.”

     The comments echo official announcements from the Bank of Canada, as the central bank said last year that digital currencies could pose a threat to central bank stability.