Updated on January 25, 2023 6:05 PM
Cryptocurrency assets and the enormous range of related goods and services have expanded quickly in recent years and are increasingly connected to the regulated financial system.
"Cryptocurrency assets have the potential to significantly alter the global monetary and financial system," according to an IMF blog post from December 2021.
Due to the potential for cryptocurrencies to revolutionize the current financial system, regulators are paying close attention to the difficulties they present.
The two main points of emphasis are the potential effects of cryptocurrencies on financial stability and the requirement to safeguard vulnerable customers.
The number of Canadians who possess crypto assets is rapidly increasing, and efforts to regulate the industry must catch up, according to a top Bank of Canada official, who noted that many consumers might not comprehend the risks of investing in products such as bitcoin.
According to its mini-budget 2022, Canada's federal government intends to place regulations on the local cryptocurrency sector. The officials began a series of meetings with shareholders to explore the benefits and drawbacks of digital assets, stablecoins, and CBDCs.
"This is still a small area, but it is fast expanding. It is also highly unregulated," Carolyn Rogers, Senior Deputy Governor of the Bank of Canada, stated.
The value of the global crypto asset market increased from $200 billion in early 2020 to $3 trillion at its peak. From 5% in 2020 to 13% in 2021, the proportion of Canadians who possess bitcoin has more than doubled.
"Like any item fluctuating in price, consumers see a chance for rapid returns, and our concern is that people may not grasp the risks, or even that it is not a controlled field," Rogers explained.
Following Putin's "special military operation" in Ukraine, some politicians and financial professionals warned that Russia would use digital currencies to avoid some of the sanctions imposed by the West.
On the contrary, Changpeng Zhao, CEO of Binance, the world's largest crypto exchange, believes that bitcoin and altcoins are not an appropriate way to escape financial penalties.