Bank of Canada is preparing regulation of stablecoins
2022.12.20 02:38
Bank of Canada is preparing regulation of stablecoins
Budrigannews.com – On December 19, staff at the Bank of Canada published an analytical note on stablecoins, also known as crypto assets that are referenced to fiat. The note expressed the authors’ support for further regulation of the cryptocurrency asset in addition to a review of the mechanisms for creating and distributing stablecoins and a list of the potential risks and benefits associated with them.
Between the beginning of 2020 and the middle of 2022, the global market for fiat-referenced crypto assets increased by 30 times, reaching $161 billion in U.S. dollars. The note says that they are mostly used on platforms for trading crypto, but they could be used in a lot of other ways, especially when combined with smart contracts.
“Especially in a more digitalized economy, these cryptoassets could improve payment services and increase competition. However, “they could pose significant risks to the stability of the financial system if safeguards are not in place,” the authors wrote.
#cdnpoli#cdnpolitics#Canada#PoilievreIsMissInformation#PierrePoilievreIsLyingToYou
Did you know that #PierrePoilievre & the Conservative party voted to grow the crypto currency sector, the one that lost 50% of its value? Watch how fast Skippy votes so not to get noticed.
pic.twitter.com/USu6NS4BRo— SmartyrNow (@SmartyrNow) December 19, 2022
The note centers around fixation among the dangers distinguished. Both holders of stablecoins and stablecoins themselves are subject to concentration risk:
“Currently the top three fiat-referenced cryptoassets have 90% of the total fiat-referenced cryptoasset market; […] Similarly, the top 1% of investors hold approximately 90% or more of the total supply of the major fiat-referenced cryptoassets.”
Such fixation implies that effects on those coins and holders could outsizedly affect the economy overall.
According to the note, “most existing regulatory regimes, in Canada and abroad, are not presently fit for purpose” in regards to the regulation of fiat-referenced cryptoassets, despite guidance from international standards-setting bodies. It provided a brief overview of the frameworks and interim measures that are currently being developed, and it concluded:
“A timely and comprehensive regulatory approach in Canada will ensure that fiat-referenced cryptoassets can deliver potential benefits without posing unnecessary risks.”
In light of the current state of cryptocurrency regulation in Canada, the note was perhaps most intriguing. In February, the “Encouraging the Growth of the Cryptoasset Sector Act” (Bill C-249) was presented to the Canadian House of Commons. The crypto community in Canada gave the bill a lot of support, but after its second reading, it became politically contentious and was effectively killed.
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