Paul Beaudry, the deputy Governor for the Bank of Canada, stated that the financial system was not exposed to any kind of significant risk because of cryptocurrencies like Bitcoin (BTC) at the current rate of their adoption. Beaudry was speaking on Tuesday at the Ontario Securities Commissions Dialogue 2021 and talked about the risks to the stability of the financial system in Canada. When questioned whether there was a risk associated with cryptocurrencies, the deputy governor answered that the Bank of Canada did not believe that the development of cryptocurrency is creating any kind of systemic risk to the financial system up till now.
The deputy governor did not that this was possibly because cryptocurrencies are not very involved with the financial system right now and are very removed from it. However, as the crypto market continues to grow and more people begin investing in it, there is a possibility that cryptocurrency would become a major risk. The official said that this would then lead to a certain level of vulnerability. He said that they hadn’t reached the point where they had to think about the big risk of crypto to the economy, but it is something they were monitoring very closely.
Beaudry also went on to say that popular cryptocurrencies, such as Bitcoin, don’t play such a big role where payments are concerned because people buy these classic cryptocurrencies primarily for the purpose of speculation. However, he added that there are digital assets like stablecoins, which could end up playing a bigger role where payments are concerned because they are backed by fiat currencies and assets. He stated that this was also something they were keeping their eyes on. Canada has distinguished itself as one of the most crypto-friendly countries in the world.
As a matter of fact, it has become one of the first jurisdictions in the world that has actually approved a Bitcoin exchange-traded fund. The country has also proven to be a popular spot for global cryptocurrency miners. The Cambridge Bitcoin Electricity Consumption Index disclosed that in terms of hashrate as of August 21, Canada ranks at the fourth spot in global nations. However, despite the progressive adoption and progress of cryptocurrencies, it is important to note that the Bank of Canada has expressed their skepticism about the crypto space earlier. The central bank in Canada said back in May that even though digital assets like Bitcoin had been adopted by institutional investors, they were still a high risk asset.
A financial system review of the most important economic vulnerabilities and financial risks was conducted by the Bank of Canada. It said that the price volatility that occurred due to speculative demand is the most prominent obstacle to the widespread acceptance of digital assets and cryptocurrencies as a means of payment. Nonetheless, it is currently good news for crypto enthusiasts in Canada because it doesn’t seem as if any strict legislation will be introduced for regulating these assets in the country, like some other countries seem to be doing.