Last week Timothy Lane, Deputy Governor of the Bank of Canada (BoC), spoke about the state of cryptocurrencies. Lane does not foresee any imminent risks to the BoC’s ability to fulfil its mandate. Nonetheless the bank is creating a contingency plan for a scenario where crypto-assets cause issues. This prudent approach in the face of low risk is because of the potential for rapid changes.
In his
speech, Lane highlighted the rate of growth in crypto-assets. However, he clarified that the sector is not currently a threat to Central Banks because of the small size and limited interconnectedness with mainstream financial systems. However, that could change, hence the contingency plan.
One of the future risks is if cryptocurrencies were to undermine the BoC’s ability to provide a means of payment with stable purchasing power. Another is if it affected their ability to implement monetary policy. Additionally, current permissionless blockchain technologies lack finality and hence payments can be reversed. The BoC needs to be able to provide a means of settlement that has finality and security.
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