Tag: Bank Of Canada

Canadians Consulted on Digital Currency

by Blockchain News

The Bank of Canada (BoC) has launched a public consultation to seek input from Canadians on the possible creation of a digital Canadian dollar. The consultation will run from May 8 until June 19, and the bank has emphasized it is not currently developing a central bank digital currency (CBDC) nor looking to replace cash. Rather, it is exploring the idea of a digital Canadian dollar as the world becomes increasingly digital. Senior Deputy Governor of the BoC, Carolyn Rogers, stated that the bank is seeking to hear from Canadians what they value most in the design of a digital dollar. The input will help the bank make decisions relating to the security and reliability of a potential digital currency, as well as ensuring it meets the needs of Canadians.

The BoC highlighted that it is important to consider the possibility of a digital Canadian dollar as cash usage declines, potentially excluding many Canadians from the economy. The bank also acknowledged the potential risks posed by the use of foreign CBDCs or cryptocurrencies, which could threaten the stability of the Canadian financial system.

The consultation’s questionnaire covers a wide range of topics, including payment methods used in the last month, how often the respondent would potentially use a Canadian CBDC, and what design features they would like to see. It also asks whether the respondent currently holds or uses cryptocurrencies and features demographic questions about age, gender, education, and income.

If a CBDC was issued, physical notes would still be provided “for those who want them,” according to the bank. The BoC said it will publish a report summarizing the consultation later this year.

While the consultation does not necessarily mean that a digital Canadian dollar will be created, it is a significant step towards exploring the possibility. Canada is not the only country considering a CBDC, with many central banks worldwide exploring the potential of digital currencies. The BoC’s consultation seeks to ensure that the bank makes an informed decision on the matter, taking into account the needs and desires of Canadians.

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The Bank Of Canada Stresses Stablecoin Regulation When Legislation Is Presented

by Blockchain News

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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.

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Crypto poses no big risk to economy so far, Bank of Canada official says

by Cointelegraph

Cryptocurrencies like Bitcoin (BTC) do not pose any significant risk to the financial system at their current level of adoption, according to Bank of Canada’s Deputy Governor Paul Beaudry.

Beaudry spoke about the risks to the stability of the Canadian financial system at the Ontario Securities Commission Dialogue 2021 on Nov. 23.

When asked whether cryptocurrencies are a risk, the deputy governor responded that the Bank of Canada doesn’t think that crypto is “developing in a way that creates a systemic type of risk for a financial system” up to now. This is because cryptocurrencies are “quite removed from a financial system,” Beaudry noted.

But as the crypto market grows bigger with more people investing in it, crypto becomes more of a risk, which could mean a certain level of vulnerability, the official said:

“We’re not at the point yet of thinking this a big risk for the economy but this is something we’re keeping an eye on very closely.”

Beaudry also stressed that classic cryptocurrencies like Bitcoin do not play much of a role in payments as investors buy BTC “mainly to speculate.”

But there are also digital assets like stablecoins that are backed by assets and fiat currencies, which could potentially play a bigger role in payments, he said. “That’s something we’re also keeping an eye on,” Beaudry added.

Canada has emerged as one of the world’s most crypto-friendly countries, becoming one of the first jurisdictions in the world to approve a Bitcoin exchange-traded fund. Canada has also been a popular spot for global crypto miners, ranking the fourth largest nation in terms of hash rate according to Cambridge Bitcoin Electricity Consumption Index as of August 2021.

Related: Fidelity clears regulatory hurdle to become Canada’s first institutional Bitcoin custodian

But despite progressive crypto development and adoption, the Bank of Canada has expressed some skepticism about crypto before. In May, Canada’s central bank said that digital assets like Bitcoin remain a highly risky asset despite adoption by institutional investors.

“Price volatility stemming from speculative demand remains an important obstacle to the wide acceptance of crypto assets as a means of payment,” the Bank of Canada wrote in its financial system review on the most important financial risks and economic vulnerabilities.