Bank of Canada: The cryptocurrency arena must be regulated before it becomes too big
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Answer Bank of Canada: The cryptocurrency arena must be regulated before it becomes too big
The recent drop in cryptocurrency prices has global authorities worried about risks in some projects, such as the Terra project ecosystem.
In the context of regulatory reforms targeting the crypto industry that are more imminent than ever.
The Central Bank of Canada has expressed the urgent need to impose such rules before the sector becomes so large that it could lead to the collapse of the overall financial market at some point.
Regulatory urgency towards crypto is an urgent necessity:
Caroline Rogers, the first deputy governor of the Bank of Canada, told in an interview withReuters“Regulating the industry has become more urgent as more people have invested in the cryptocurrency category.Read:Bithumb decides to cut ties with offshore exchanges… for these reasons!
Caroline was concerned that as the industry continued to grow rapidly, attracting new investors who might not understand the risks involved, and the violent drop in prices might eventually indirectly affect the broader financial system.
This is an area that is still relatively small, but it is growing very rapidly.
We don’t want to wait until it gets much bigger before we put the regulation in place.
The deputy governor views the sector as a largely unregulated area, where investors are trying to make quick gains without much knowledge.
According to a recent survey by the bank, 13% of Canadians will own Bitcoin in 2021, up from 5% recorded the previous year.
Despite the urgency of introducing relevant regulations, the Deputy Governor acknowledged the difficulties in classifying and supervising the asset class within the current regulatory framework.
These are somewhat like banking assets, and somewhat similar to capital markets.
One of the challenges is figuring out how well it fits into the current system, and if it doesn’t, how can we modify its system so that it does.Read:Amazon registers three new domains related to cryptocurrency
Bitcoin is not a hedge:
Like most central banks around the world, the Bank of Canada also has a cautious stance on cryptocurrencies.
When asked if bitcoin can help Canadians pull out of decades-old high inflation by liberal MP Evan Baker, Caroline replied that the bank does not consider it a solution to inflation and does not recognize it as a stable source of value.Read:Jamaica is preparing to launch a central bank digital currency “CBDC” in 2022
She acknowledged that some important innovations have already taken place in the crypto space.
Contrary to its relatively neutral stance on cryptocurrencies, the bank is currently in the development stage of a CBDC digital currency.
In March, Canada’s central bank announced a partnership with the Massachusetts Institute of Technology on a one-year research project to explore the potential design of a CBDC and how this product would interact with the financial system.
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