According to a senior official at the Bank of Canada, there is a rapid rise in the number of Canadians who own cryptocurrencies and it is essential that crypto regulation efforts also keep up with this increase. The official noted that a lot of people do not have a clear understanding of the risks associated with investing in crypto assets like Bitcoin. This has become a pressing issue because cryptocurrencies are now being integrated into the financial system of the country, which leaves it vulnerable to crypto shocks. It means that events in the crypto space, such as the recent decline in prices, could also affect the broader financial system in Canada.
Deputy Governor Calls for Action
Carolyn Rogers, the Senior Deputy Governor of the Bank of Canada, gave an interview last week. She stated that even though the crypto space was still relatively small in Canada, it was expanding at a rapid pace. She said that it was not wise to wait for it to become larger before implementing some regulatory controls.
In early 2020, the global cryptocurrency market had a value of about $200 billion. But, last year it hit its peak and recorded a value of $3 trillion. This week, the Bank of Canada published a report in which it said that there were only 5% of Canadians who had invested in Bitcoin in 2020, but this number had doubled last year when the crypto market had been breaking records, as it reached 13%.
Rogers stated that when the price of an asset is jumping around, investors obviously see it as an opportunity to make some money. She said that their biggest concern was that people were doing so without a complete understanding of the risks involved. She said that they may not be aware that it is not a regulated area.
Validity of Concerns
The Canadian central bank’s senior deputy governor has not made any wrong claims, as evident from the condition of the crypto market. While it may have reached new all-time highs last year, 2022 has not proven to be a good one for the industry so far. In recent months, there has been a massive plunge in the crypto prices and investors have suffered huge financial losses. Risk appetite has also soured of late because of the economic conditions globally.
Rogers stated that regulation is a must for the crypto industry, but the real challenge is figuring out how to go about it. She said that this was because of the nature of cryptocurrencies. In some ways, digital currencies are similar to banking assets, while they also bear characteristics of capital markets. She said that they need to figure out how to incorporate them in the existing regime. In case they do not fit, they need to make adjustments in order to help them fit into it.
Canada is not the only country that has become concerned, especially after people had to deal with losses in the crypto space.