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Paul Beaudry, the Deputy Governor of the Bank of Canada, believes the crypto space does not pose a significant threat to the financial system, at least not at the moment. He shared his thoughts on the matter during the Ontario Securities Commission Dialogue 2021 on November 23.
During the forum, Beaudry said cryptos have not yet attained adoption levels that can threaten the economy. The central bank official added that the Bank of Canada has been keeping an eye on the crypto sector.
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He, however, noted that the central bank does not think the crypto industry is developing in a way that creates a systemic type of risk for the Canadian financial system.
According to him, cryptos are very removed from the country’s financial system. Nonetheless, he believes that the crypto industry could potentially create a vulnerability in Canada’s economy if it continues growing and getting more adoption from retail investors.
Beaudry added that the Bank of Canada has not yet reached a point where it considers crypto a massive risk for the economy. Even so, he asserted that the authority is keeping a close eye on the rapidly-growing digital asset sector.
Most cryptos do not play a role in payments
The central banker added that although enthusiasts tout most cryptos as payment options, they do not play a significant role in payments. He further noted that most of the coins in the market are speculative assets.
However, Beaudry believes stablecoins, which are dissimilar to conventional cryptos like Bitcoin (BTC/USD), have the potential to disrupt payments.
He added that the Bank of Canada is observing how things are playing out in the stablecoin market. Beaudry claims it is important to monitor how the payments system is evolving and the different players that are driving this evolution. In so doing, he believes central banks would be in a position to distinguish the roles that various coins play.
This news comes as Canada continues positioning itself as a crypto-friendly jurisdiction. In February this year, the country approved the first ETF based on BTC’s spot market.
Additionally, it opened its doors to BTC miners after China’s ban. According to data from the Cambridge Bitcoin Electricity Consumption Index, Canada was the fourth-largest BTC hashrate generator as of August.
Canada’s regulators also gave Fidelity Investments the go-ahead to launch the first institutional BTC custodial service earlier this month.