According to Paul Beaudry, deputy governor of the Bank of Canada, cryptocurrency like Bitcoin (BTC) poses no major danger to the financial system at its current level of use.
At the Ontario Securities Commission Dialogue 2021, Beaudry talked about the threats to the financial system’s stability in Canada.
When questioned if cryptocurrencies represent a problem, the deputy governor said the Bank of Canada does not believe crypto is “growing in a way that presents a systemic sort of risk for a financial system” at this time. This is because, as Beaudry pointed out, cryptocurrencies are “very distant from a financial system”.
However, the crypto market expands in size and more individuals participate in it. Hence, it becomes more of a danger, potentially exposing the industry to vulnerability. As stated by the official.
“We aren’t yet convinced that this is a significant economic danger, but it is something we are actively monitoring.”
Investors acquire BTC “mostly to speculate”
Traditional cryptocurrencies, such as Bitcoin, have little function in payments, according to Beaudry, because investors acquire BTC “mostly to speculate”.
However, digital assets backed by assets and fiat currencies might play a greater role in payments, he added. “We’re keeping an eye on it as well,” Beaudry said.
Canada has established itself as one of the most crypto-friendly countries in the world. Becoming one of the first governments to approve a Bitcoin ETF. According to the Cambridge Bitcoin Electricity Consumption Index, as of August 2021, Canada was the fourth-largest country in terms of hash rate.
Despite the growth in crypto development and usage, the Bank of Canada has previously voiced doubt about the currency. Despite institutional investors’ embrace, Canada’s central bank stated in May that digital assets such as Bitcoin remain a high-risk asset.
In its financial system assessment on the most serious financial risks and economic vulnerabilities, the Bank of Canada noted, “Price volatility resulting from speculative demand remains a key impediment to the mainstream acceptance of crypto assets as a method of payment”.