A new report from the Bank of Canada doesn’t offer a flattering view of cryptocurrency investors.
For the second consecutive year, the study “found that awareness of Bitcoin increased with financial literacy, but the likelihood of ownership declined as the level of financial literacy increased.”
By contrast, a lack of financial literacy—defined as “understanding of the concepts central to economic decision making”—was associated with a higher likelihood of cryptocurrency ownership.
According to the central bank, in 2019 93% of Canadians with a high level of financial literacy had heard about digital assets such as Bitcoin—but just 4% actually owned some. All of this seems to suggest this group doesn’t really regard crypto as a compelling proposition.
Somewhat unsurprisingly, awareness of cryptocurrencies is much lower among consumers with low levels of financial literacy, standing at just 72%. But in an interesting development, 8% of this group own a digital currency.
Reading between the lines, the findings indicate that those who know less about investing are more likely to be drawn into acquiring cryptocurrencies—and risk getting their fingers burned.
That said, the bank also found cryptocurrency awareness and ownership “tends to be highest among young, male, university-educated and high-income Canadians.”
Yield farmers just don’t understand
That comes hot on the heels of a Sept. 21 CoinGecko survey of yield farmers putting assets to work in the red hot but far more complex decentralized finance sector.
Distressingly, it found that while almost all of the yield farmers surveyed—93%—said they were earning at least 500% return on their investments, and nearly 80% said they understood the risks and rewards, a large number did not actually understand those risks.
Most notably, 40% were not able to read the smart contracts that underpin these investments—despite claiming that they do. This “implies that they don’t know their real ROI and are extreme risk-takers for the sake of the high returns,” the survey concluded.
Cash vs. Crypto
The Bank of Canada survey did acknowledge that cash usage is continuing to decrease in favor of credit cards and mobile payments. That said, the institution didn’t see banknotes disappearing from the economy any time soon.
Just 10% of those surveyed for the report said they have stopped using cash entirely while 8% plan to stop soon—and 82% said they have no plans whatsoever to stop using cash.
It’s interesting to see that, while 18% of respondents have either ditched cash or plan to do so, twice that figure—36%—say they won’t be too inconvenienced if cash vanished overnight. Maybe, just maybe, cryptocurrencies geared toward everyday payments have a chance to win around some consumers.
And the Bank of Canada is interested in digital currencies. Back in January, it joined five other central banks in looking into the merits of central bank digital currencies. And in June, the institution advertised for a CBDC project manager who would be involved in a project of “major social significance” to design a banknote in digital form.