Authorities around the world have become conscious of the risks associated with some projects such as Terra, following the recent crypto market crash.
Bank of Canada Senior Deputy Governor, Carolyn Rogers in an interview highlights that with the wider adoption of cryptocurrencies it has become quite important to regulate the industry.
The governor is concerned that as more individuals start to invest in digital assets, especially those who are unaware of the risks associated with them, and as the industry continues to expand, then the effect of a wild downturn in prices can reflect in the broader financial system.
She adds that the industry, though small as of now, is rapidly growing. According to her, authorities should bring regulatory measures before the industry becomes large.
Rogers thinks of the crypto industry as a “largely unregulated area” where individuals without having proper knowledge about the industry look for making some quick gains. In a survey conducted by the bank, 13% of Canadians were found to be the owner of Bitcoin, a 5% rise from last year.
The deputy governor also acknowledged that within the current regulatory framework, there exist challenges in categorizing and overseeing the asset class.
She believes the crypto assets are similar to banking assets and capital markets. She further highlighted that it is a challenge to make digital assets fit in the current regime and to know how to fit them if they don’t.
“Bitcoin Not A Stable Source Of Value”
Bank Canada, similar to most Central Banks around the world, the Bank of Canada has a cautious stand on digital assets. The deputy governor says that the bank doesn’t think that Bitcoin is inflation against a hedge. She also added that the bank neither identifies it as “a stable source of value.” Though she acknowledges that crypto space has mothered some “important innovations.”
Interestingly, the bank is currently in the initial stage for a possible CBDC, contrary to its neutral stance on cryptocurrencies. It announced a collaboration with MIT on a one-year research project in March. The project seeks to analyze the potential design of a CBDC and the way it will interact with the financial system.
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Source: https://www.thecoinrepublic.com/2022/06/12/bank-of-canada-advises-regulatory-urgency-for-crypto-sector-heres-why/