OTTAWA - The number of Canadians who own cryptoassets is growing rapidly and efforts to regulate the sector need to start keeping pace, a senior Bank of Canada official said, noting many people may not understand the risk of investing in products like bitcoin.
The issue is growing more pressing as cryptoassets become integrated into Canada's financial system, increasing the risk that crypto shocks - like the recent price plunge - could end up hitting the broader financial system.
"This is an area that is still small, but it's growing really rapidly. And it is largely unregulated," Bank of Canada Senior Deputy Governor Carolyn Rogers told Reuters in an interview on Thursday. "We don't want to wait until it gets a lot larger before we bring regulatory controls in place."
The value of the global cryptoasset market soared from $200 billion in early 2020 to $3 trillion at its peak, the Bank of Canada said in a report this week. The share of Canadians who own bitcoin more than doubled to 13% in 2021 from 5% in 2020.
"Like any asset that's jumping around in price, people see an opportunity for quick gains," said Rogers. "Our concern is they may not understand the risks. They may not even understand that it's not a regulated area."
Indeed, cryptocurrency prices plunged in recent months as appetites for high-risk assets soured, exposing some investors to significant financial losses.
The industry needs to be regulated, said Rogers, but the challenge is sorting out just how that will be done.
"These are somewhat like banking assets, somewhat like capital markets," she said. "One of the challenges is to figure out how do they fit in the current regime, and if they don't fit, how do we adjust the regime so that they will fit."
(Reporting by Julie Gordon in Ottawa, Editing by Matthew Lewis)