Cryptocurrecy Bitcoin has extended its grasp among more and more among Canadians. As per a survey report of Bank of Canada, number of investors in Bitcoin has risen from 5% of Canadians in 2020 to 13% in 2021.
Bank of Canada is Central Bank of Canada. It is responsible for formulating monetary policy of Canada and takes various measures for promoting safe environment for financial system of Canada. The Bank also monitors the meteoric growth of cryptoasset markets in the world as well as in Canada and its implications for the economic and financial system.
The Bank of Canada conducted the ‘Financial System Survey’ of 2022 between February 22 and March 18. However, the findings related to Bitcoin ownership for 2021 in the Financial System Survey have been arrived from the Bank’s Bitcoin Omnibus Survey, results of which will be released in the next publication.
The Bank noted in its report that considerable movement in cryptoassests’ prices make these assets ‘inadequate as a method of payment’ and resultantly, they remain ‘primarily a speculative investment.’
The report further says that the number of investors in cryptoassets is growing fast in Canada but these investors often ‘underappreciate the risks associated with them’.
According to the survey, ‘the market capitalization of cryptoassets (including stablecoins) rose from about US$200 billion at the start of 2020 to a peak of close to US$3 trillion in November 2021.’
Bank of Canada in the survey report makes a case for framing regulations for crypto markets. The bank notes that main hindrance in adoption of crypto assets among wider public is presence of high volatility in price movements and lack of regulations which in a combined manner make them highly vulnerable.
Interestingly, the Bank of Canada, in the survey report has some special words for stablecoins considering them as ‘potential solution to price volatility in the cryptoasset market’. This report says, “They should be less volatile than other cryptoassets because their value is pegged to a national currency in most cases and partially or fully backed by liquid assets in many cases. But the lack of transparency and leverage associated with some of them can lead to disorderly runs when investors start doubting their ability to redeem their funds.”
Detailing the risks of cryptocurrencies including stablecoin, Bank of Canada in the report calls for urgency in devising regulations to address the gap in regulatory measures. The report states that Bank of Canada is already working with Canadian authorities as well as international institutional authorities on framing crypto related regulatory mechanisms with a global perspective.
To see the complete survey report of Bank of Canada, please see this link.
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