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We develop a dynamic model to capture key features of decentralized finance lending. We identify a price-liquidity feedback: the market outcome in any given period depends on agents' expectations about lending activities in future periods, with higher future price expectations leading to more lending and higher prices in that period.

We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.

The rise in digital payment innovations has spurred a discussion about the future of cash at the point of sale. The Bank conducted the 2021–22 Merchant Acceptance Survey Pilot Study to study trends in merchant cash acceptance and monitor conditions for the potential issuance of a central bank digital currency.

We present results from the 2021 Methods-of-Payment Survey, including updated payment shares. We highlight long-term trends and provide additional context for results with respect to the COVID-19 pandemic.

We develop an algorithm and run it on a hybrid quantum annealing solver to find an ordering of payments that reduces the amount of system liquidity necessary without substantially increasing payment delays.

Cryptoassets that reference a national currency (commonly known as stablecoins) aim to peg their value to the reference currency and typically use a reserve of traditional financial assets to maintain the peg. The market value of these fiat-referenced cryptoassets has grown more than thirtyfold between early 2020 and mid-2022. We explore some of their potential benefits and key risks.

Our paper contributes to the discussion about the utility of stablecoins for retail payments through an objective, evidence-based approach that compares stablecoins with traditional retail payment methods. The paper also provides insights that could be useful in the design of central bank digital currencies.

What risks could stablecoins pose to the financial system? We argue that the stabilization mechanisms of stablecoins give rise to the risk of confidence runs, which can propagate to broader cryptoasset markets and the traditional financial sector. We also argue that stablecoins can contribute to financial stability risks by facilitating the buildup of leverage and liquidity mismatch in decentralized finance. Such risks cannot be addressed by ensuring the price stability of stablecoins alone. Finally, we explore the potential implications of stablecoins for the current system of bank-intermediated credit and for monetary policy.

We report on the dynamics of Bitcoin awareness and ownership from 2016 to 2021, using the Bank of Canada's Bitcoin Omnibus Surveys (BTCOS). Our analysis also helps understand Bitcoin owners who adopted during the COVID-19 and how they differ from long-term owners. 

We analyze the value proposition and limitations of decentralized finance (DeFi). Based on a distributed ledger and smart contracts, DeFi can guarantee the execution of financial contracts, potentially lowering the costs of intermediation and improving financial inclusion.