Bank of Canada: Bitcoin poses no big risks

According to Deputy Governor Paul Beaudry, cryptocurrencies are "quite detached from a financial system."

Bank of Canada: Bitcoin poses no big risks

As long as Bitcoin adoption remains at its current level, Paul Beaudry says it is unlikely to pose any significant risk to the financial system.

In a recent interview with the Ontario Securities Commission, Beaudry discussed the risks to the stability of the Canadian financial system.

According to the deputy governor, the Bank of Canada does not believe cryptocurrencies are a risk until crypto is "developed in a way that creates systemic risks" for financial systems.

According to Beaudry, cryptocurrencies are "quite detached from a financial system."

With the growing crypto market, the risk associated with investing in crypto increases, making it more vulnerable, the official said.

"We don't yet see this as a significant risk to the economy, but we are monitoring it very closely," Beaudry continued.

Beaudry also said that Bitcoin does not have much of a role in payments because investors buy Bitcoin "mainly for speculation."

However, there are also digital assets backed by fiat currencies or assets, such as stablecoins, which could have a wider impact on payments.

The Canadian government became one of the first jurisdictions in the world to approve a Bitcoin exchange-traded fund, becoming one of the most crypto-friendly countries in the world.

According to Cambridge Bitcoin Electricity Consumption Index as of August 2021, Canada ranked fourth in terms of global crypto mining hash rate.

However, the Bank of Canada has expressed skepticism toward crypto despite progressive development and adoption. Although institutional investors have adopted digital assets such as Bitcoin, Canada's central bank said they are risky assets.

In its financial system review on the most important financial risks and economic vulnerabilities, the Bank of Canada wrote that speculative demand contributed to the price volatility of crypto assets.