Following the failure of the Canadian government to contemplate legislation, experts from a central bank have penned a letter in which they assert that regulation is necessary in order to realize the advantages of fiat-referenced cryptocurrency assets.
On December 19th, members of the Bank of Canada’s staff published an analytical report on stablecoins, often known as fiat-referenced cryptocurrency assets.
In addition to a discussion of the processes that may be used to create and distribute stablecoins, as well as a rundown of the possible dangers and advantages associated with using them, the writers of the letter voiced their support for more regulation of the cryptocurrency asset.
Between the beginning of 2020 and the middle of 2022, the worldwide market for crypto assets that are referred to fiat currencies expanded 30-fold, reaching a total value of $161 billion in U.S. dollars.
According to the note, their primary use is on platforms that facilitate cryptocurrency trading; but, they might have a broad range of other applications as well, particularly when combined with smart contracts.
Especially in an economy that is becoming more digitized, the introduction of these cryptoassets might bring higher levels of efficiency and competitiveness to the payment services industry. On the other hand, if there were no protections in place, they may present substantial threats to the integrity of the financial system
Due to the high concentration of these coins and holders, any changes that occur to them might have a disproportionately large effect on the economy as a whole.
According to the paper, even though there has been advice provided by international standards-setting groups about the regulation of fiat-referenced cryptoassets, most current regulatory systems, in Canada and overseas, are not at present suitable for purpose.
The message was probably most fascinating when seen in light of the current regulatory climate around cryptocurrencies in Canada.
In February, the Encouraging the Growth of the Cryptoasset Sector Act, also known as Bill C-249, was presented into the House of Commons of Canada.
The crypto community in Canada was generally on board with the measure, but it ended up being politically controversial and was ultimately put to rest after its second reading.