DBRS Morningstar Releases Commentary on Large Canadian Banks and the Bitcoin Surge

DBRS Limited (DBRS Morningstar) published a commentary titled “Large Canadian Banks: Unlikely to Be Swept up in the Bitcoin Surge.” As Bitcoin continues its meteoric rise, this commentary highlights the reluctance of the six large Canadian banks to join the growing chorus of U.S. companies that have publicly indicated that holding Bitcoin is good corporate practice.

The commentary highlights the following:
-- Investor interest in cryptocurrencies continues to surge, with a number of U.S. companies indicating that holding Bitcoin is good corporate practice.
-- Conversely, Canadian companies, including the six large Canadian banks, have not been as forthcoming.
-- This lack of enthusiasm can be attributed to the accounting treatment of cryptocurrency holdings, price volatility, as well as fundamental questions about the risks associated with privacy, illicit activity, and the legal and regulatory safeguards surrounding cryptocurrencies.
-- As a result, we do not expect the six large Canadian banks to accumulate significant levels of cryptocurrencies despite the pressures they face as a result of the low interest rate environment. They are more likely to find the underlying blockchain technology useful.

Overall, the lack of movement on cryptocurrencies from the six large Canadian banks can be attributed to several factors, including the accounting treatment of holdings of these currencies. “To meet growing investor demand, the six large Canadian banks may potentially add cryptocurrencies as investments in funds managed by their global asset management businesses,” said Robert Colangelo, Senior Vice President, Global Financial Institutions Group. “We expect regulators to continue to prepare for digital asset adoption by implementing rules that will require financial institutions to understand their exposure and mitigate associated risks.”

Notes:
The commentary is available at www.dbrsmorningstar.com.

For more information on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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