Virtual Loonie: Canada to Test its Own Version of Bitcoin

The Royal Canadian Mint is looking to launch its own digital currency, called MintChip.

First announced in 2012, MintChip allows consumers to load value into a device such as a smartphone or tablet via a mobile app, and use it to make purchases at the point of sale or online. The digital currency was envisioned as a way to complete small electronic payments, in transactions of $10 or less.

Although it’s still in the research and development phase, MintChip is about to get its first test run. The virtual currency will be on display in the US at the National Retail Federation’s Annual Convention and EXPO in New York this week. Attendees will be able to see how retailers can accept MintChip at any location equipped with a special point of sale (POS) terminal developed by Ingenico.

After the convention, MintChip will be tested at cafeterias in the Mint offices in Ottawa and Winnipeg. Third party pilots are slated for later this year.

The Mint explained that value is transferred instantaneously in a cash-like manner, from one account to the next. Additionally, no third parties are involved in the transaction, which the Mint says keeps transactions secure. The transfer has the ID of the chip receiving the funds, the date, and the amount being sent.

Stronger Backing

What makes MintChip unique is that it is pegged to the Canadian dollar, which should allow it to avoid the drastic swings Bitcoin has undergone. “The value of MintChip that is out in circulation is backed by Canadian dollars, dollar for dollar, that is sitting in a real-world environment, in a bank account held by the Royal Canadian Mint,” said Marc Brule, the Mint’s chief emerging payments officer. “You can cash in your MintChip value or equivalent Canadian dollars at any time in the future, and that it is supported by the value of Canadian dollar at that time.”

Additionally, Brule believes MintChip will eschew the illegal activity that has plagued other virtual currencies because fund transfers are limited and there is a cap on how much can be in an account at any one time.

Retailers will be
charged fees
for using MintChip-enabled terminals, ITBusiness.ca reported. Brule would not say how much those fees would be, though he anticipates that they will be “significantly lower” than credit card interchange fees.

Brule said that the rise of Bitcoin has helped spur on MintChip’s development. “I think it’s raised the consciousness and awareness around digital currencies, virtual currencies, digital products, whatever you want to call them,” he said. “I think it’s been very helpful to the MintChip proposition.”

While some experts, such as Bank of America, view virtual currencies as “winner takes all” market, Brule is not concerned about competition that already exists or that may crop up in the future. “We view MintChip as offering consumers some choice and we don’t necessarily see it displacing any or all of the other products that are out there today,” he said. “I don’t believe there’s going to be one (digital cash product) that’s going to conquer the world.”

The Mint is also talking with some developing countries about how they might implement MintChip.

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