Bank of Canada calls for the urgent need for crypto regulation

The Central Bank of Canada has come forward during a time when the whole crypto market is bathing in blood and calls for an urgent need for regulations. It said that the risks in projects like Luna should be taken care of before the sector becomes so big that it could bring down the entire financial market at one point.

Bank of Canada recognizes crypto’s rapid growth

During an interview with Reuters, the senior deputy manager of Bank of Canada, Carolyn Rogers, said that regulating the crypto industry has become increasingly important as more people are entering the space. She seems worried about the industry’s rapid growth, attracting new investors who may not be aware of the involved risks. This unawareness in the industry could result in a spillover effect on the broader financial system in a violent price situation. She added:

“This is an area that is still small, but it’s growing really rapidly. We don’t want to wait until it gets a lot larger before we bring regulatory controls in place.”

Rogers called the sector a “largely unregulated area” where investors try to earn “quick gains” without much knowledge about the projects. In a recent survey conducted by the central bank, a 5% increase has been recorded from 2020 to 2021.

However, she acknowledged that the categorization and overseeing of the asset class in the existing regulatory framework is a complex task and will take some time.

“These are somewhat like banking assets, somewhat like capital markets. 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,” she stated.

Notably, Rogers was appointed Senior Deputy Governor of the Bank of Canada, effective December 15, 2021, for a term of seven years. Before that, Paul Beaudry, former deputy governor of the Bank of Canada, said that crypto poses no significant risk to the economy.