With countries working round the clock to mitigate the impact of the coronavirus (COVID-19) pandemic on their economies, many financial experts have suggested that nations should adopt Bitcoin (BTC) amid rising debts.
An anonymous source of the Canadian Department of Finance revealed in an email shared with BNN Bloomberg today that the country is not planning to add BTC to its reserve, despite the asset’s astonishing performance in recent times.
The source stated that despite the looming financial crisis on world economies, the Canadian foreign reserve policy is well structured to protect the value of the nation’s currency from the impact of COVID-19.
According to the report, the Canadian foreign reserve assets are managed using an asset-liability matching framework to reduce financial instruments’ volatility.
Based on this, for an asset to be added to the Canadian foreign reserve, it must have a corresponding liability “with a highly correlated value.”
The spokesperson noted that Bitcoin’s inability to pair with liability is why it cannot be added to Canada’s foreign reserve.
“Bitcoin does not meet these criteria as it remains relatively volatile and cannot be paired under the Asset-Liability Matching framework,” the source concluded.
Becoming a Reserve Currency
The development is coming after the former prime minister of Canada, Stephen Harper, urged countries to add Bitcoin to their reserve to save themselves from the pandemic’s storms.
In an interview with Cambridge House’s Jay Martin, the former prime minister disclosed that there would be several available alternatives to be used as a reserve in the coming days.
Harper, who is also an economist, said Bitcoin could serve as an alternative currency but will never replace the United States dollar despite the latter’s downtrend.
“Other than gold, Bitcoin […] I think you will see the number of things that people use as reserves will expand, but the U.S. dollar will still be the bulk of it,” Harper said.