Cryptocurrency offers no significant danger to the economy so far, according to a Bank of Canada official

Canada was one of the first nations to establish a Bitcoin ETF and ranks fourth in terms of hash rate. According to Bank of Canada deputy governor Paul Beaudry, cryptocurrencies such as Bitcoin (BTC) do not represent a substantial danger to the financial system at their current level of use.

Beaudry addressed the Ontario Securities Commission’s Dialogue 2021 on Tuesday on the dangers to the stability of the Canadian financial system.

When questioned if cryptocurrencies pose a danger, the deputy governor said that the Bank of Canada does not believe crypto is currently “growing in a manner that generates a systemic sort of risk for a financial system.” This is because cryptocurrencies are “completely unrelated to a banking system,” Beaudry said.

However, as the crypto market expands in size and more individuals participate in it, it gets more risky, implying a certain amount of vulnerability. According to the official:

“We are not yet convinced that this represents a significant danger to the economy, but it is something we are actively monitoring.”

Additionally, Beaudry emphasised that traditional cryptocurrencies such as Bitcoin do not play a significant role in payments, since investors purchase BTC “mostly for speculation.”

However, he said, there are digital assets such as stablecoins that are backed by physical assets and fiat currencies that might possibly play a larger role in payments. “That is something we are also monitoring,” Beaudry said.

Canada has established itself as one of the most crypto-friendly nations in the world, having been one of the first jurisdictions to authorise a Bitcoin exchange-traded fund. Canada has also been a popular location for worldwide crypto miners, placing fourth in terms of hash rate according to the August 2021 Cambridge Bitcoin Electricity Consumption Index.

Despite the advancement and use of crypto, the Bank of Canada has previously voiced concern about the technology. In May, Canada’s central bank said that despite institutional investors’ acceptance of digital assets such as Bitcoin, they remain a high-risk asset class.

“Price volatility driven by speculative demand continues to be a significant impediment to widespread adoption of crypto assets as a method of payment,” the Bank of Canada noted in its financial system evaluation of the most significant financial risks and economic vulnerabilities.

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