Earlier this month, we reported that the Bank of Canada essentially dismissed bitcoin as it explained that it was unconcerned about the growing popularity of the digital currency. It said that it would monitor and assess it and that’s all the action it would take at this present time.
According to a new document published by the Bank of Canada on Tuesday entitled “Understanding Platform-Based Digital Currencies,” the central bank believes that the peer-to-peer decentralized virtual currency could potentially disrupt the global financial stability if adoption persists in becoming widespread.
“As they do with platform-based digital currencies, central banks are studying and closely monitoring decentralized digital currencies such as Bitcoin,” the bank said. “There could be potential risks to overall financial stability if Bitcoin became a significant means of payment and the Bitcoin system remained unstable.”
Indeed, bitcoin has become immensely popular in North America, Europe and in East Asia. Thousands of merchants and retailers across the globe are implementing bitcoin technology and offering customers the option to pay in the digital currency.
The Bank of Canada also listed concerns it had that bitcoins could be used for illicit transactions and as a means to evade taxes – this has become a common worry for governments and central banks worldwide.
“Governments may become concerned about legal security and law enforcement issues associated with Bitcoins,” the central bank added. “For example, the private nature of bitcoin transactions, bitcoins could easily be used to facilitate criminal transactions and to evade taxes.”
In addition, the central bank went further by warning about future shutdowns of bitcoin exchanges, the origins of the bitcoin protocol and the fact that consumers cannot reverse transactions.
“In particular, given that digital currencies such as Bitcoin are not regulated and do not have a centralized issuer, users bear all of the risks themselves and have no legal recourse should they wish to reverse a bitcoin transaction,” the Bank of Canada noted.
At the time of this writing, bitcoin is trading at just under $450.