Bank of Canada: cryptoassets’ volatility an obstacle

OTTAWA — Price volatility is keeping cryptoassets from being widely accepted as a means of payment, the Bank of Canada said on Thursday, though the markets’ rapid evolution is an emerging vulnerability to Canada’s financial system.

The central bank said it is monitoring cryptoasset markets, which have surged in popularity in the last year as they have become easier for consumers to access through exchange-traded funds, listed companies and other investment vehicles.

Despite the broadening interest, cryptoassets like bitcoin and other cryptocurrencies remain high risk as their intrinsic value is hard to establish, the Bank said in its annual review of Canada’s financial systems.

“Price volatility stemming from speculative demand remains an important obstacle to the wide acceptance of cryptoassets as a means of payment,” it said.

Bitcoin, the biggest and most popular cryptocurrency rose nearly 14 per cent on Thursday to US$42,000, after plunging 14 per cent a day earlier to its lowest since late January.

The Bank of Canada added that while cryptoasset markets are currently not of “systemic importance” in Canada, that could change if a major technology firm were to issue a cryptocurrency that became widely accepted as a digital payment method.

The Bank of Canada is currently developing its own cash-like central bank digital currency that it could issue to the public, should the need arise. Many other top central banks are doing similar work.