Beaudry spoke at the Ontario Securities Commission Dialogue in November 2021 about the risks to the stability of Canada’s financial system.
When asked if cryptocurrencies pose a risk, the lieutenant governor replied that the Bank of Canada did not believe that cryptocurrencies “evolve in a way that creates some kind of systemic risk to the financial system.” This is because are “completely removed from the financial system,” noted Beaudry.
But as the crypto market gets bigger and more people invest in it, cryptocurrencies become riskier, which can mean some level of vulnerability, the official said:
“We’re not at the point where we think this is a huge risk to the economy, but we’re watching it very closely.”
Beaudry also emphasized that classic cryptocurrencies such as Bitcoin do not play a major role in payments, as investors buy BTC “primarily for speculation”.
But there are also digital assets like asset-backed stablecoins and fiat currencies that are likely to play a bigger role in payments, he said. “We are keeping an eye on that too,” added Beaudry.
Canada has grown to be one of the most crypto-friendly countries in the world and is one of the first jurisdictions in the world to approve an exchange-traded Bitcoin fund. Canada is also a popular location for global crypto miners and is ranked the fourth largest country by hash rate in the Cambridge Bitcoin Electricity Consumption Index (as of August 2021).
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But despite the increasingly progressive development and introduction of cryptocurrencies, the Bank of Canada has previously expressed a certain skepticism towards cryptocurrencies. In May, the Central Bank of Canada said digital assets like Bitcoin remain a high-risk asset despite acceptance by institutional investors.
“Price volatility due to speculative demand remains a major impediment to the widespread adoption of crypto assets as a means of payment,” the Bank of Canada wrote in its review of the system.