Poilievre says he will stop proposed Central Bank Digital Currency due to risk of 'politicized banking'

Poilievre wrote that as Prime Minister, his government "will keep the Bank of Canada out of retail banking by banning its proposed Central Bank Digital Currency."


Conservative leadership frontrunner Pierre Poilievre announced on Thursday that, as Prime Minister of Canada, he would restore the Bank of Canada’s independence by adopting former leader Andrew Scheer’s bill that empowers the Auditor General to audit the Bank of Canada, and by asking the Auditor General to audit the Bank’s $400 billion quantitative easing program to determine why the Bank missed its inflation target so badly.

Poilievre said in a statement that he will also stop the proposed Central Bank Digital Currency, out of fears that it would lead to "politicized banking."

"Justin Trudeau has threatened the Bank of Canada’s independence with a half-trillion dollars of deficits that required the central bank to print money and cause inflation," said Poilievre in a statement. "Money-printing deficits have sent more dollars bidding up the price of goods. Inflationary taxes have made it more expensive for businesses to produce those goods. The more Liberals spend, the more things cost. That is JustinFlation. I will end it, by restoring central bank independence, mandating an independent audit of all the money printing, and stopping the risky Central Bank Digital Currency."

Poilievre wrote that his government "will keep the Bank of Canada out of retail banking by banning its proposed Central Bank Digital Currency."

"The Bank of Canada indicates it is in the 'development phase' of its own digital currency and that the final decision will rest with the Minister of Finance," he wrote.

"The Auditor General must investigate whether the Trudeau government interfered with the Bank of Canada’s independence, by using $400 billion of newly-printed money to fund its deficits. We need answers on why inflation is now triple the Bank’s 2 percent target."

"I am running for Prime Minister to put people back in control of their lives by making Canada the world’s freest nation," said Poilievre. "That includes taking control of money away from politicians and bankers and giving it back to the people."

Poilievre wrote that all unnecessary government action should be avoided, writing that the central bank currency that people already "store in digital bank accounts used for digital transactions."

"So, what is new? Based on its discussion paper on the idea and on other models around the world, the only thing new is that the central bank would get into retail banking by offering retail deposits and banking services to everyday people.

The Bank of Canada’s current liabilities include deposits from financial institutions, but not from retail customers. A CBDC would allow retail customers to do the same, indicates the discussion paper: "A retail CBDC is defined as a liability of the Bank of Canada denominated in Canadian dollars that can be held and transferred in electronic form by the general public."

Money in electronic format that retail customers hold in a Bank is a complex way of describing a "deposit," Poilievre argues. This change would first nationalize bank deposits and then, by consequence, other banking activities that deposits enable.

"Banks lend out the deposits in mortgages and small business loans. If a central bank sponged up deposits from retail customers, where would the funding for normal bank lending originate?" he asked.

The Bank contradicts itself on whether a Central Bank Digital Currency would pay interest on those deposits, the statement says. "The cash-like CBDC envisioned would pay no interest. However, the payment of interest is technically feasible, especially for designs that connect to users over a network."

If the CBDC did not pay interest, why would customers switch their bank deposits to CBDC to get what they are already getting from a chartered bank? Moving deposits over would be a nuisance, because doing so would mean people would no longer have their checking accounts on the same banking app or web-based platform as their savings accounts, investment accounts and other financial products.

The central bank would have to sweeten the pot to win customers. Here the government-owned bank would have an incredible artificial advantage: the ability to create cash out of thin air to pay more attractive interest rates than private sector competitors could match. While giving this artificial cash to millions of customers would cause runaway inflation, it would also force customers to move from commercial banks to central banks to get in on all the free money. Furthermore, a central bank would not need to worry about running losses because, as Governor Macklem told the Finance Committee, taxpayers are always there to bail them out. Commercial banks could not do these things, so could not compete to maintain deposits they lend out.

Poilievre's statement also details how his government would empower the Auditor General to scrutinize the Bank of Canada's balance sheet and transactions "in order to ensure it is operating independently from the government and meeting the highest standards of financial accountability."

"Historically, the Bank has been singularly focused on a stable rate of inflation. Since the pandemic, the government’s deficit spending program has been underwritten almost exclusively through the use of Quantitative Easing - a fancy word for expanding the money supply," he wrote.

There is precedent for allowing the Auditor General to have jurisdiction over arm’s length independent financial institutions, says Poilievre. The Public Sector Pension Investment Board (PSPIB) operates free of political interference or direction but is still subject to the AG’s oversight.


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