Should Canada Eliminate Cash?

Abstract

Canadians’ use of cash at the point of sale has been declining since the early 1990s, due in part to the widespread adoption of debit and credit cards. More recently, the introduction of electronic currencies and person-to-person payments via mobile phone have made the need for cash as a medium of exchange obsolete. My research draws on data from the Bank of Canada’s Method of Payment Surveys to perform a cost-benefit analysis of eliminating cash within Canada and moving towards exclusively electronic means of payment. My research pays particular attention to the fact that eliminating cash removes the lower bound on nominal interest rates, enabling conventional monetary policy to be implemented in Canada’s current low interest environment. My findings suggest that though Canada is not yet ready to eliminate cash, the benefits are such that there may be reason to pull Canadians towards a cashless society.