Crypto poses no big risk to economy so far- Bank Of Canada

Canada is the fourth-largest country in terms of hash rate and one of the first countries to authorize a Bitcoin ETF.Crypto

According to Deputy Governor Paul Beaudry of the Bank of Canada, cryptocurrencies like Bitcoin (BTC) do not represent a substantial danger to the financial system at their current level of use.

On Nov. 23, Beaudry spoke at the Ontario Securities Commission Dialogue 2021 on the challenges to the stability of the Canadian financial system.

When questioned if cryptocurrencies constitute a concern, the deputy governor stated that the Bank of Canada does not believe cryptocurrency is “growing in a way that presents a systemic sort of risk for a financial system” at this time. Because cryptocurrencies are “very distant from a financial system,” as Beaudry pointed out, this is the case.

However, as the crypto market expands in size and more individuals participate in it, crypto becomes more of a risk, implying a degree of vulnerability. According to the official,

“We’re not yet convinced that this is a significant economic danger, but it’s something we’re keeping a careful watch on.”

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Traditional cryptocurrencies like Bitcoin, according to Beaudry, do not play a significant part in payments since investors acquire BTC “mostly to speculate.”

But, he added, there are digital assets such as stablecoins, which are backed by assets and fiat currencies and might play a greater role in payments. “We’re keeping an eye on it as well,” Beaudry added.

Canada has established itself as one of the most crypto-friendly countries in the world, having been one of the first jurisdictions to authorize a Bitcoin exchange-traded fund. According to the Cambridge Bitcoin Electricity Consumption Index as of August 2021, Canada has been a popular destination for worldwide crypto miners, ranking fourth in terms of hash rate.

Despite the rapid growth and use of cryptocurrency, the Bank of Canada has previously voiced caution about it. Despite institutional investors’ acceptance, Canada’s central bank stated in May that digital assets such as Bitcoin remain a high-risk asset.

The Bank of Canada noted in its financial system assessment on the most serious financial risks and economic vulnerabilities that “price volatility resulting from speculative demand remains a key impediment to the mainstream acceptance of crypto assets as a method of payment.”