A new report released by the Bank of Canada (BoC), the country’s financial authority, launched the latest warning against Bitcoin: according to the document, the widespread adoption of the world’s most famous cryptocurrency could undermine the stability of the current financial system.
The authors of the report, entitled “Understanding Platform Based Digital Currencies”, believe “there could be potential risks to overall ?nancial stability if Bitcoin became a signi?cant means of payment and the Bitcoin system remained unstable”. Cryptocurrency’s biggest flaw, according to the bank, is the volatility of its price, among other problems that constitute a risk for the users.
Bitcoin users face a number of challenges, particularly the extreme volatility of the price of Bitcoins. As well, it is relatively easy to delete or misplace personal holdings of bitcoins. There have also been a number of security incidents that have compromised either Bitcoin accounts or some other part of the Bitcoin infrastructure (such as Bitcoin exchanges).
Still, the Bank of Canada does not ignore the advantages that Bitcoin might bring. “Potential bene?ts associated with Bitcoins include lower transaction costs to online merchants than for conventional payment instruments such as credit cards, since there is no third-party intermediary. Similarly, the costs of international remittances might also be lower than for conventional remittance methods”, the document adds.
Questioned about the report at the Senate banking committee, the central bank’s governor Stephen S. Poloz said “these are early days (…) and so far digital currencies have not made it to what we call money“.
“We’ve got a ways to go before we need to be thinking about policy implications”, he added, quoted by CityAM.
The report was released following a promise made by the Canadian authorities back in January. At the time, the Canadian government, the central bank and the Office of the Superintendent of Financial Institutions announced they would be monitoring any developments involving virtual currencies, such as the arrival of new Bitcoin ATMs in the Canadian territory.
Featured image from Wikimedia