Bank Of Canada Asserts Cryptocurrencies Create No Big Risks To The Economy Yet

• Canada’s apex bank does not see cryptocurrencies as a major threat in tilting the balance of the financial ecosystem.
• The Bank’s Deputy Governor shared this sentiment in a symposium but highlighted the potential powers of stablecoins.
• Canada is seen as one of the progressive jurisdictions for cryptocurrencies after they became the first in North America to launch the Bitcoin ETF.

The Bank of Canada thinks cryptos do not pose a major systemic risk to the economy because they are still operating on the outskirts of the financial system. This is in contrast with their neighbors, the US that sees cryptocurrencies as the catalyst for financial chaos.

The Deputy Governor’s View

Paul Beaudry, the deputy governor of the Bank of Canada shared his view during a Q and A on the low-risk nature of cryptocurrencies at the Ontario Securities Dialogue 2021 on Tuesday. The official of the bank in his speech began by summarizing the significant strides that the country’s economy has made since the COVID-19 pandemic. He says the economy owes plenty of thanks to a strong regulatory framework, well-capitalized financial institutions, and unprecedented support from the government.

Despite the advancements, Beaudry highlights certain risks that could cause imbalances in the economy but cryptocurrencies are not one of them. He noted that core cryptos are not used for payments but are mainly used by investors for speculative purposes.

“We think it’s not developing in a way that’s creating a systemic type of risk for our financial system because they’re kind of quite removed directly from our financial system,” said Beaudry. “Stablecoins will have the potential to play more of a bigger role in payments and that’s something we’re also keeping an eye on.” He adds that the Bank views crypto assets in two ways, those that stand alone like Bitcoin and those that are backed like stablecoins.

Canada is considered one of the lenient countries in terms of cryptocurrency regulation. The country holds the record as the first North American country to launch a Bitcoin ETF, creating a path for the US to follow suit. In the wake of the Chinese cryptocurrency crackdown, Canada opened its borders to the influx of miners and has risen to become the fourth largest Bitcoin hash rate provider.

Not Always A Bed Of Roses

While Canada is seen as largely progressive, it is not always the case as the country has in the past viewed the asset class with a measure of skepticism. In May, the country’s central bank remarked that the asset class is risky for investors but made no other comments regarding stifling its adoption.

“Price volatility stemming from speculative demand remains an important obstacle to the wide acceptance of crypto assets as a means of payment,” said the bank.

In the face of impending sanctions from the Ontario Securities Commission, Binance announced that it will be shutting down operations for Ontario-based users. The OSC had previously issued Statements of Allegations against Bybit, Poloniex, and KuCoin for failing to comply with regulations.