Bank of Canada: “cryptocurrencies are high-risk assets”

The central bank of Canada has called cryptocurrencies high-risk assets and warned that it views cryptocurrencies as a threat to financial stability.

In its annual survey of vulnerabilities and risks in the financial sector, the Central Bank of Canada stated that despite the growing popularity of cryptocurrencies, their intrinsic value is “difficult to quantify.”

The regulator included crypto assets in its vulnerability report because it perceives them as a threat to the country’s financial status quo. According to the report, the cryptocurrency is gaining significant media attention and the market capitalization of all assets has grown from $ 200 billion in early 2020 to over $ 2 trillion in May 2021.

The Central Bank of Canada notes that “if a large technology firm with a significant user base decides to release a cryptocurrency that gains widespread acceptance as a payment instrument,” the status of cryptocurrencies as an asset class could strengthen.

The report mentions stablecoins – the Central Bank of Canada claims that such currencies could harm the bank if they are not pegged to the Canadian dollar.

“Notably, unless stablecoins are backed solely by Canadian dollars, their widespread adoption could limit the CB of Canada’s ability to conduct monetary policy and act as lender of last resort,” notes the Bank of Canada.

In conclusion, the regulator writes that “despite their growing popularity, these markets are not systemically important in Canada, either as an asset class or as a payment instrument.”

According to last year’s study by the Bank of Canada, citizens of a country with at least basic financial literacy rarely invest in cryptocurrencies. However, in February of this year, the Canadian regulator was the first in North America to approve the launch of a Bitcoin ETF.