The world of crypto is one of extremes. Giant crashes have some people saying “crypto is dangerous” and others saying “this is the time to get in.” It can be confusing, and it can even cause anxiety, or fear, that the next big gold rush is going to pass you by. You’ve heard the warnings and also about blockbuster payoffs and you’re probably wondering, “should I buy Bitcoin or other cryptos?”
It’s a question asked by millions of Canadians, and one the Bank of Canada would also like an answer to… In fact, they conducted research into who owns crypto, who understands crypto, who is buying crypto, and why?
According to The Bank of Canada, digital currencies could affect the central bank’s core functions (like the way it influences monetary policy, currency, or funds management). The Bank is even contemplating whether it should introduce a digital currency for Canadians to use as an alternative to cash. There are several countries that have already implemented such currencies, with varying degrees of success and failure. In Canada, this idea is far from becoming a reality, but with such an uncertain future, knowledge is the most important tool towards prudent financial decisions. With this in mind, the Bank of Canada studied the topic and recently released a cryptocurrency awareness report.
What did the cryptocurrency report find?
Firstly, keep in mind that the report studied awareness and ownership of Bitcoin and crypto assets in the four years leading up to the COVID-19 pandemic, and things change quickly in the crypto world. But, between 2016 and 2020, only 5% of Canadians owned Bitcoin.
That might seem like a relatively low number, but remember, 5% of Canadians amounts to nearly two million people who are affected by the volatility of this market. Two million people who are susceptible to losing access to funds, to scams, data breaches, as well as sudden price surges and crashes like the one we saw in May 2022.
Who owns Bitcoin?
Of this approximately 2 million people, most Bitcoin owners were young, educated males, with a high household income, and low financial literacy.
The Bank of Canada expressed concern over this last point. According to its survey, only 31% of Bitcoin owners had a high knowledge of cryptocurrency. The rest tried to profit with limited or medium comprehension about the way the technology works. And this, the Bank says, makes them more susceptible to fluctuations in the market.
There is also some interesting contrast between the demographics of who owns crypto and who are most aware of it.
For those who were most aware of crypto, there was one key factor that influenced whether they bought it or not: financial literacy. Investors who had a higher degree of financial literacy were more likely to be aware of Bitcoin, but much less likely to own it. The study suggests that this is because of the perceived risk associated with owning cryptocurrencies when compared to more traditional investments.
Overall, the study found that females were approximately 7.5% less likely to be aware of Bitcoin, and 9% less likely to own it (in 2020). But, as levels of education, income, and financial literacy increased, so did the levels of awareness among the population.
The study also found that age factored into who was buying Bitcoin. For example, in 2020, 11% of Canadians aged 18-34 owned Bitcoin, but only 0.6% of Canadians who were 55 or older did.
Why are Canadians buying crypto?
Recently – and most prominently after the massive crypto crash in May 2022 – critics of cryptocurrencies have been extremely vocal about regulating and monitoring crypto assets. Back in March, U.S. President Joe Biden issued an executive order to ensure the responsible development of digital assets in the U.S. Meanwhile, many experts are warning that the crypto bubble will burst and they are urging governments to push back against “risky, flawed and unproven digital financial instruments”.
And yet, believers in crypto continue to buy, invest, promote, and gamble on this incredibly volatile asset.
In Canada, crypto as an investment opportunity remains the most popular reason for owning Bitcoin (39%). In the survey, 31% of owners also cited being interested in the technology aspects of Bitcoin, including the way it uses secure blockchain technology to prevent loss and fraud. However, the report highlighted that cryptocurrency frauds in Canada surged more than 400% between 2017 and 2020.
The Bank of Canada also surveyed participants who were aware of Bitcoin but did not own it. Nearly 30% of participants said they didn’t buy Bitcoin because they didn’t understand the technology well enough, and 15% said they didn’t trust private currencies that were not backed by a government. Only 8 percent believed that Bitcoin wouldn’t pass the test of time.
Where does that leave Canadians?
While a majority of Canadians are still fairly risk averse when it comes to cryptocurrencies like Bitcoin, it’s something the Bank of Canada will continue to monitor, and perhaps even regulate in the near future. As of now, it views the evolution of crypto assets as a vulnerability to maintaining financial stability.