Paper Money

Bank of Canada report reveals operations during pandemic

The Bank of Canada’s annual report reveals details about the use of bank notes during the pandemic, as well as its research into central bank digital currency.

Image courtesy of Bank of Canada.

The Bank of Canada’s Annual Report for 2020 not surprisingly called the past year “like no other.”

The section devoted to currency told of how the COVID-19 pandemic affected the bank’s currency operations, in that a higher-than-usual demand for cash put pressure on bank note inventories and the bank’s operations centers. Early in the pandemic, the bank worked to increase inventories of bank notes at regional distribution centers. This lowered the risk of disruptions in the transportation of bank notes during the lockdown, and ensured an uninterrupted supply of notes to all parts of the country.

In the face of public concern about the transmission of the virus on paper money, the bank consulted with health experts, whose findings supported the view that handling cash is no riskier than touching other common surfaces. The bank then strongly advised retailers to continue accepting cash.

While continuing advanced research into anti-counterfeiting measures, it gave credit to the advanced security features of its polymer bank notes for holding counterfeiting to a rate of 8 parts per million as of December 31, significantly below its target of 30 parts per million.

An important revelation concerned the bank’s research into a central bank digital currency (CBDC). This included how the pandemic altered historical trends. The report says the bank determined there is no compelling reason to issue a CBDC at this time, but planning has begun for when one might be needed. In February, the bank released a comprehensive document outlining recommendations and began engaging with policy makers, financial institutions and other central banks to help guide future work in this area. It collaborated with six other central banks on a joint report that outlined the underlying principles and core features of a digital currency and how a digital currency could help central banks deliver on public policy objectives.

Finally, after a final decision by the Canadian Minister of Finance, the bank will soon announce whose portrait will be on the next $5 bill.

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