According to Bank of Canada Deputy Governor Paul Baudry, cryptocurrencies like Bitcoin (BTC) do not pose a significant risk to the financial system at their current level of adoption.
Boudry spoke about the risk to the stability of the Canadian financial system at the 2021 Dialogue of the Ontario Securities Commission on Tuesday.
When asked whether cryptocurrencies pose a risk, the vice president replied that the Bank of Canada still does not believe that cryptocurrency is “evolving in a way that creates a systematic type of risk to the financial system.” This is due to “the complete removal of cryptocurrencies from the financial system,” Boudry said.
But as the cryptocurrency market grows and more people invest in it, cryptocurrency becomes more risky, which could mean a certain level of vulnerability, the official said:
“We don’t think so far that this poses a serious risk to the economy, but we are watching it closely,” he added.
Boudry also emphasized that classic cryptocurrencies such as bitcoin do not play a large role in payments as investors buy BTC “essentially for speculation.”
But there are also digital assets like stack coins backed by assets and fiat currencies that can play a big role in payments, he said. “We’re monitoring this as well,” Boudry added.
Canada has become one of the most crypto-friendly countries in the world and has become one of the first jurisdictions in the world to approve a Bitcoin exchange fund. Canada has also been a popular destination for global cryptocurrency miners, ranking fourth in terms of hash rate according to the Cambridge Bitcoin Electricity Consumption Index since August 2021.
Related: Fidelity Removes Regulatory Barriers to Become Canada’s First Institutional Bitcoin Deposit.
But despite the gradual development and implementation of cryptocurrencies, the Bank of Canada has expressed some skepticism about cryptocurrency in the past. In May, the Bank of Canada said that digital assets such as bitcoin remain a high-risk issue despite the adoption of institutional investors.
“Price volatility fueled by speculative demand remains a major obstacle to the widespread acceptance of cryptocurrencies as a means of payment,” the Bank of Canada wrote in its Financial System Review on key economic risks and vulnerabilities.
