The Bank of Canada’s Senior Deputy governor Paul Beaudry shared in an interview that, so far, cryptocurrencies pose no big risk to the economy.
The bank’s senior deputy governor Carolyn Wilkins said it is “probably too early” to say what the longer-term impact might be.
Cryptocurrencies are not widely used in Canada and they do not appear to pose major risks to the Canadian financial system at this time.
Canada is one of the first countries to approve a Bitcoin ETF and is the fourth-largest nation in terms of hash rate.
Paul Beaudry, deputy governor of the Bank of Canada, said that cryptocurrency like Bitcoin (BTC) does not pose any significant risks to the financial system at the current level of adoption. The Bank of Canada has published reports on these issues before, most recently in 2014. This new report summarizes the current situation and explains some common questions about cryptocurrencies like Bitcoin, Ethereum, Litecoin and Ripple.
Beaudry spoke on Tuesday at the Ontario Securities Commission’s Dialogue 2021 about the risks to the stability of the Canadian financial system.
In response to the question of whether cryptocurrencies are a risk, the deputy governor of the Bank of Canada said that the bank does not believe cryptocurrency is “developing in a way that creates systemic risks for a financial system” just yet. Beaudry noted that cryptocurrency is “quite removed from a financial system.”
Crypto markets become more risky as they become bigger and more people invest in them, which may lead to some level of vulnerability, the official explained:
Beaudry also noted that classic cryptocurrencies like Bitcoin don’t play much of a role in payments, since investors buy BTC “mainly as speculative investments.”
Stablecoins are digital assets backed by assets and fiat currencies, which could play a greater role in payments, Beaudry said. “And we’re watching that closely as well,” he added.
A Bitcoin exchange-traded fund has been approved in Canada, becoming one of the first jurisdictions in the world to approve such a fund. According to the Cambridge Bitcoin Electricity Consumption Index from August 2021, Canada ranked fourth among nations in terms of hash rate.
While crypto is developing and adopting at an accelerated rate, the Bank of Canada has expressed scepticism about it in the past. In May, the BC said that despite institutional investors’ adoption, digital assets like Bitcoin are highly risky.
“Price volatility stemming from speculative demand remains an important obstacle to the wide acceptance of crypto assets as a means of payment,” the Bank of Canada wrote in its financial system review on the most important financial risks and economic vulnerabilities
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