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According to a Bank of Canada official, crypto presents no major risk to the economy.

3 min reading

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

According to Bank of Canada deputy governor Paul Beaudry, cryptocurrencies such as Bitcoin (BTC) do not present a substantial risk to the financial system at their existing level of use.

On Tuesday, Beaudry talked about the risks to the sustainability of Canada's financial system at the Ontario Securities Commission Dialogue 2021.
When questioned if cryptocurrencies pose a risk, the deputy governor stated that the Bank of Canada does not believe that crypto is "developing in a way that creates a systemic type of risk for a financial system" at this period. This is because cryptocurrencies are "quite removed from a financial system," as per Beaudry.
However, as the crypto market expands in size and more individuals invest in it, crypto becomes more of a risk, which may indicate a specific level of susceptibility. According to the official: “We’re not at the point yet of thinking this a big risk for the economy but this is something we’re keeping an eye on very closely.”
Beaudry also emphasised that classic cryptocurrencies, like Bitcoin, don't play a significant part in payments because investors acquire BTC "mainly to speculate."
However, he thinks that digital assets such as stablecoins, which are supported by assets and fiat currencies, could play a major role in payments.“That’s something we’re also keeping an eye on,” Beaudry continued.
Canada has evolved as one of the most crypto-friendly countries in the world, being one of the first authorities to approve a Bitcoin exchange-traded fund. Canada has also been a prominent site for global cryptocurrency miners, ranking fourth in terms of hash rate according to the Cambridge Bitcoin Electricity Consumption Index as of August 2021.
However, despite advanced crypto development and acceptance, the Bank of Canada has already stated some concerns regarding crypto. Despite widespread adoption by institutional investors, Canada's central bank stated in May that digital assets such as Bitcoin remain a high-risk asset.
“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 noted in its financial system analysis of the most significant financial risks and economic vulnerabilities.

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