Canada was the first North American country to approve crypto ETF. Even though, the Canadian’s central bank has a different position when it comes to crypto.
On Wednesday the Bank warned all investors about the cryptocurrencies, describing them as “high-risk” assets. And they are not absolutely wrong. During the last two weeks, the crypto market crashed leaving many crypto believers shocked.
In its annual review of vulnerabilities and risks in the financial sector, the Central bank said that despite the growing popularity, it is hard to find the intrinsic value of assets like Bitcoin and Ethereum.
According to the Bank, these assets are suitable only for people who would like to speculate. During the last two weeks, the crypto market crashed leaving many crypto believers shocked. Bitcoin lost more than 2/3 of its value and went under $32K. Other cryptocurrencies followed. Even after the drop, some investors found an opportunity to buy more crypto and the price went over $40K.
The main reasons for the Bank’s attention are first the market cap of the crypto market and second – the media attention. The market cap of all cryptocurrencies combined went from $200B at the beginning of 2020 to $2T now.
The Bank also added that “if a large technology firm—a so-called Big Tech—with a sizable user base decided to issue a cryptocurrency that became widely accepted as a means of payment,” crypto could become more of an asset class and a threat.
When it comes to stablecoins. The Central bank said that it has its concerns about them. “Notably, unless stablecoins are backed exclusively by Canadian dollars, their widespread adoption could inhibit the Bank’s ability to implement monetary policy and act as lender of last resort”.
The crypto industry is very popular in Canada. This year the authorities approved the first North American Bitcoin ETF. A few months later came the Ethereum ETF. Even that the Bank is skeptical about the future of the crypto and thinks that Canada doesn’t need it. “Despite their growing popularity, these markets are not of systemic importance in Canada, neither as an asset class nor as a payment instrument,” the report read.
The crypto is on the bank’s radar since 2019 when the institution said in its 2019 annual report, that cryptocurrencies have the “potential to create changes in the financial system.”
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