Bank of Canada emphasizes need for stablecoin regulation as legislation is tabled

Staffers astatine the Bank of Canada released an analytic enactment connected fiat-referenced crypto assets, different known arsenic stablecoins, Dec. 19. In summation to a reappraisal of mechanisms for creating and distributing stablecoins and a database of the imaginable risks and benefits they involve, the enactment expressed the authors’ enactment for further regularisation of the crypto asset.

The planetary marketplace for fiat-referenced crypto assets accrued 30-fold betwixt the opening of 2020 and mid-2022, reaching $161 cardinal successful U.S. dollars. They are chiefly utilized connected crypto-trading platforms, the enactment states, but they person the imaginable for a wide assortment of different uses, particularly successful operation with astute contracts.

“These cryptoassets could bring efficiencies and greater contention to outgo services, particularly successful a much digitalized economy. However, without safeguards, they could airs important risks to the stableness of the fiscal system,” the authors wrote.

— SmartyrNow (@SmartyrNow) December 19, 2022

The enactment focuses connected attraction among the risks identified. Concentration hazard applies to stablecoins themselves arsenic good arsenic holders of stablecoin:

“Currently the apical 3 fiat-referenced cryptoassets person 90% of the full fiat-referenced cryptoasset market; […] Similarly, the apical 1% of investors clasp astir 90% oregon much of the full proviso of the large fiat-referenced cryptoassets.”

Such attraction means that impacts connected those coins and holders could person outsized interaction connected the system arsenic a whole.

Related: Canada bans crypto leverage and borderline trading aft FTX collapse

Despite guidance from planetary standards-setting bodies regarding the regularisation of fiat-referenced cryptoassets, “most existing regulatory regimes, successful Canada and abroad, are not presently acceptable for purpose,” the enactment stated. It concisely outlined frameworks and interim measures presently being developed and concluded:

“A timely and broad regulatory attack successful Canada volition guarantee that fiat-referenced cryptoassets tin present imaginable benefits without posing unnecessary risks.”

The enactment was possibly astir absorbing successful airy of the existent presumption of cryptocurrency regularisation successful Canada. Bill C-249, “Encouraging the Growth of the Cryptoasset Sector Act,” was introduced into the Canadian House of Commons successful February. The measure was mostly supported by Canada’s crypto assemblage but proved politically divisive and was efficaciously buried aft its 2nd reading.