Politics

Pierre Poilievre promises to quash Bank of Canada's foray into digital currency

Conservative leadership contender Pierre Poilievre promised Thursday he'd spike the Bank of Canada's proposal to offer a digital currency, saying this sort of financial instrument should be left to the private sector.

Conservative leadership contender wants to audit central bank

Conservative Party of Canada MP Pierre Poilievre, who is running for the leadership of his party, speaks at a rally in Toronto on April 19. (Evan Mitsui/CBC)

Conservative leadership contender Pierre Poilievre promised Thursday he'd spike the Bank of Canada's proposal to offer a digital currency, saying this sort of financial instrument should be left to the private sector.

Poilievre has emerged as a fierce critic of Canada's central bank. He's tried to link decades-high inflation to its COVID-era policy of quantitative easing and recently slammed the institution as "financially illiterate."

Poilievre said that a government led by him would extend the auditor general's authority to include the Bank of Canada and push for a review of its pandemic policies.

"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," Poilievre said.

"That's 'Justinflation,'" he said, using his gag name for inflation rates under the Liberal government. "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."

State-backed crypto akin to nationalization, Poilievre campaign says

Poilievre is a big proponent of cryptocurrencies such as bitcoin. He has suggested that Canadians can "opt out" of inflation by pouring money into these investments, and he doesn't want the Bank of Canada to offer a competing product.

Bitcoin has had a volatile run in recent months as central banks have increased interest rates to tackle pandemic-driven inflation, making speculative investments less attractive. The price of bitcoin has dropped some 40 per cent since its November 2021 high.

Central banks around the world are concerned that the explosive growth of bitcoin could destabilize the existing financial system.

In this environment, the Bank of Canada has been studying the viability of creating its own digital currency — digital tokens, similar to cryptocurrency, that would be pegged to the value of the Canadian dollar.

An advertisement for bitcoin is displayed on a street in Hong Kong on Feb. 17, 2022. (Kin Cheung/AP Photo)

The Bank of Canada is not alone. A number of central banks are proposing government-backed digital currencies that would be issued and regulated by the country's monetary authority — a product that could offer the convenience of crypto with the full faith and backing of the governments that issued them.

The European Union and China already have signalled digital currencies will be launched in their respective jurisdictions.

Carolyn Rogers, the senior deputy governor of the Bank of Canada, told MPs on the Commons finance committee Monday that the central bank is in the "development stage" of its digital currency, though a decision on whether to press ahead will ultimately lie with the federal government.

"We view our job as to be ready, to have done the work ahead of time, so that if we decide that a central bank digital currency is something that would benefit Canadians, that we're ready to provide it," Rogers said.

LISTEN | The Front Burner podcast looks at the momentum behind the Poilievre campaign:

It's still early in the Conservative leadership race, but candidate Pierre Poilievre seems to have momentum. He's drawing big crowds at rallies across the country with promises to make Canada "the freest country on Earth." Front Burner producer Allie Jaynes introduces you to some of the people who attended a Toronto event last week, and CBC Politics senior reporter Catherine Cullen gives context around those crowds and how Poilievre's brand of populism compares to past candidates.

Speaking to reporters outside the Bank of Canada headquarters in Ottawa Thursday, Poilievre said a digital currency would put the central bank in competition with commercial banks as Canadians could park their deposits with the government-run institution.

According to a policy backgrounder supplied to reporters, the Poilievre campaign is concerned that a push to "nationalize" deposits would lead to "politicized banking."

The backgrounder suggests a deposit-accepting central bank would be akin to a state-run bank and politicians could "bestow blessings on voters" and "begin making election promises of more generous interest rates for depositors or other benefits."

Poilievre also raised the spectre of the Bank of Canada tracking the financial history of its would-be depositors. "It can surveil what you're doing, what you're spending and potentially abuse your civil liberties," Poilievre said.

"We saw this just several months ago when the prime minister involved the Emergencies Act in order to freeze the bank accounts of his political opponents," he said, referring to actions taken against the organizers of the truck convoy protest in Ottawa.

Poilievre wants federal watchdog to audit central bank

Poilievre also said a government led by him would adopt Conservative MP Andrew Scheer's private member's bill, which would empower the auditor general to audit the Bank of Canada. The central bank is currently exempt from this sort of oversight.

The Bank of Canada is already audited each year by two separate outside firms — currently KPMG and PricewaterhouseCoopers.

Kevin Page, the former parliamentary budget officer, said it's not clear what the AG could accomplish with these new powers.

Kevin Page, former parliamentary budget officer, says it's not clear what expanding the auditor general's powers to include the Bank of Canada would accomplish. (Chris Wattie/Reuters)

"What's the public policy imperative and rational for the AG to conduct audits? What is broken? The Bank of Canada is very transparent organization," Page told CBC News.

"If there is a concern about monetary policy and a member of Parliament wants to better understand how the bank conducts operations with respect to rate setting or its balance sheet, then open forums would be better to raise debate and scrutiny and could be used to influence the adjustment to the Bank of Canada policy mandate."

Historically, the Bank of Canada has operated free of political influence to use monetary policy instruments to pursue price stability or an inflation target.

While the government of the day cannot direct this independent officer of Parliament to study a particular thing, Poilievre said the auditor general "must investigate whether the Trudeau government interfered with the Bank of Canada's independence" during the pandemic "by using $400 billion of newly printed money to fund its deficits."

As a number of other central banks did during the Great Recession of 2008-09, the Bank of Canada embraced quantitative easing — what Poilievre calls "printing money" — over the past two years to boost lending and spending during a time of financial panic. That policy ended in October 2021.

Poilievre, who has made inflation the cornerstone of his leadership campaign, has blamed this policy for the country's inflation woes.

Experts contend that the current wave of inflation is largely pandemic-induced because the health crisis pushed up production costs — wages and raw material prices are higher than they were — and snarled supply chains.

A massive injection of government stimulus to prop up a faltering economy is also partly to blame because there's more money in circulation chasing fewer goods.

To tame inflation, Poilievre said he wants to dramatically reduce government spending to slash deficits and the national debt. He told reporters that the Liberal government's emergency COVID-related spending was "exorbitant" and "unnecessary."

ABOUT THE AUTHOR

John Paul Tasker

Senior writer

J.P. Tasker is a senior writer in the CBC's parliamentary bureau in Ottawa. He can be reached at john.tasker@cbc.ca.

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