BoC Publishes Staff Paper on Bitcoin Awareness and Ownership Use in Canada (2016-20) – But read it with caution | National Crowdfunding & Fintech Association of Canada

April 27, 2022 Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Metaverse, NFTs, FinTech and Alternative Finance, Innovation and Resources, Research No comments

BoC Publishes Staff Paper on Bitcoin Awareness and Ownership Use in Canada (2016-20) – But read it with caution

NCFA Canada | Robin Ford | Apr 27, 2022

The Bank of Canada recently published a Bitcoin survey and staff discussion paper called 'Bitcoin Awareness, Ownership and Use: 2016-20' but read it with caution

Download the paper (April 2022): https://www.bankofcanada.ca/2022/04/staff-discussion-paper-2022-10/

The paper has been reported (and misreported) in, for example, Investment Executive- https://www.investmentexecutive.com/news/research-and-markets/bitcoin-owners-young-male-and-wealthy-boc/

Investment Executive says: "The bank’s research found that half of Bitcoin owners suffer from volatility, hacks and scams." In fact, as the paper notes: "about half experienced price crashes, loss of access to funds, scams or data breaches" [our emphasis]. To be more specific, owners reported 'one or more' such incidents.

See: Crypto-tax primer in Canada

Perhaps more important, however, are flaws in the paper itself. Data on crypto currencies in Canada is scarce, and more and better data is high on our policy wish list. In a swiftly evolving and controversial area, meaningful data, and careful analysis is crucial. We respectfully suggest that the BoC's paper does not pass this test and should be read with a grain of salt.

Here are 3 cautions/gaps

1. Data Quality

The paper states: "Our 2020 data on Bitcoin awareness and ownership are from the November 2020 CAS. This survey had a more general focus on the demand for and use of cash during the COVID-19 pandemic. As a result, it collected only limited information about Bitcoin."

Most data relied on in the BoC paper is from 2019 or earlier. This is a significant defect in a fast moving area. More recent and more thorough surveys tell a different story - Ipsos: https://www.ipsos.com/en-ca/news-polls/Bitcoin-ownership-is-on-the-rise-in-Canada

"Overall, we confirmed the Canadian cryptocurrency industry is growing every year, with ownership increasing notably between 2016 (3% bitcoin ownership) and 2021 (14% cryptocurrency ownership)."

See: Gun-shy advisors struggle to provide clients with crypto guidance

The BoC paper concludes that only 5% owned Bitcoin in 2020 which is likely vastly understated. Further, Bitcoin can be (and increasingly is) held indirectly via funds such as ETFs or via shares in eg Bitcoin mining companies and other Bitcoin related enterprises.

2. Analysis

The paper talks about the risks mentioned above, but does not examine the extent to which Bitcoin owners are aware of them and willingly assume them.

The paper states: "Bitcoin owners displayed greater knowledge about the Bitcoin network than nonowners, yet they scored lower on questions testing financial literacy." However, the paper discloses an extremely simplistic evaluation of literacy.

Added to this, there is no comparison with "non-crypto" assets, risks, or events (eg, scams, hacks, and volatility). We are left to assume that in the crypto world these risks are higher compared other high risk assets. This is highly contestable.

See: Updated Report: Regulation of Cryptocurrency Around the World (Nov 2021)

3. Sample Size

The sample sizes were small and were "opt-in" not random. This warrants extreme caution on drawing firm conclusions.

Readers take care.

Download the 32 page PDF report --> here

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