Whether it’s cash or cryptocurrency, Canadians are worried about their money

There were many warning signs in February indicating that Canadians’ confidence in silver is particularly fragile at this time.

The so-called “Freedom Convoy” was blocking the streets around Parliament Hill, and the federal government had just imposed the Emergencies Act, promising to “follow the money” and put pressure on the organizers who threatened public safety.

The big banks were all warned for a few days that they should cooperate with Ottawa, dig into their records and stop the flow of contributions that were quietly paying – through digital, cryptocurrency or traditional means – for the intransigent protesters to stay in the streets.

But credit unions — those small, provincially regulated institutions so popular in the same small towns and rural areas — have been taken by surprise, not only by government action, but also by their own customers.

They rushed to their local branches and withdrew millions of dollars, fearing the government would take their savings.

“The government was far from clear about the objectives of the financial measures under the Emergencies Act,” Martha Durdin, president and CEO of the Canadian Association of credit unions.

“Many of our members have expressed this concern, and many Canadians have made large withdrawals from credit unions as a result, sometimes in the hundreds of thousands of dollars, and on a few occasions millions,” durdin said.

Fortunately, the credit unions were able to absorb the sudden withdrawals, and there was no real rush for them. But as one credit union executive told Durdin: “We had a huge number of members who were very seriously concerned about the government’s ability to seize accounts; this created a great sense of mistrust in the government that could simply seize the accounts of individuals.

This difficult period passed and, in the end, the credit unions temporarily blocked a dozen accounts worth less than half a million dollars. The federal measures were intended to target illicit donations to a cause deemed prohibited, and most Canadians avoided this kind of activity.

But it is clear from the parliamentary committee hearings that customers’ confidence in their savings has been shaken, even if they have not been swept away by a crackdown that may well have been justified and well-intentioned.

The Emergencies Act is not the only thing that has Canadians wondering where they are putting their money. The world is awash with financial sanctions against Russian oligarchs. And while few Canadians have a connection to this kind of activity, it reminds us that the state can, and will, seize assets and money if it sees good reason to do so.

At the same time, digital currencies are sending our traditional banking systems into connips. A new financial system risk assessment in Canadareleased for the first time this week by the country’s banking regulators, shows that innovations such as cryptocurrencies, stablecoins and open banking are challenging the way most Canadians have always viewed money, how to store it and how to build up a nest egg.

“Technology-driven disruptive forces continue to pose a significant threat to the business models of financial institutions, across virtually every aspect of their business and value chain,” says the Office of the Superintendent of Financial Institutions (OSFI) report. .

But do not worry. OSFI says it is involved in international organizations, plans to expand its regulatory reach and will have more to say this year.

The underlying message from the authorities is: trust us, and if you do nothing wrong, we won’t touch you.

Which brings us to inflation. At a record 6.7% in March, this is significantly eroding the value of savings, federal authorities have been unable to rein it in – they may have even exacerbated it – and it affects everyone. world.

The Bank of Canada is closely monitoring how much public confidence the central bank has in order to eventually bring it under control. And the answer is, less and less. Recent surveys show that consumers believe that inflation will stabilize in the long term, but that they are losing confidence in the near future.

This is fertile ground for the dangerous rhetoric of Conservative Party leadership candidate Pierre Poilievre. The favorite attracts huge crowds while urging supporters to reject the authority of the Bank of Canada and to “step back” from inflation by investing in bitcoin.

With all that in mind, Bank of Canada Governor Tiff Macklem is on the offensive these days, raising interest rates, talking about even more to come in June and the rest of the world. year, and explaining why Canadians should keep the faith.

But he won’t mention Poilievre’s name, let alone discuss his anti-institutional arguments or their populist appeal. But whether to ignore Poilievre and hope he goes away is not a likely scenario, given the atmosphere of mistrust and uncertainty surrounding the value of money. .

Over the next few weeks, we will see many post-convoy recommendations from parliamentarians on how the government can better manage financial security risks and cryptocurrencies. We will hear Macklem talk about eventual price stability. We will get assurances from Prime Minister Justin Trudeau and Finance Minister Chrystia Freeland about the underlying strength of our economy.

They will need to remember that public trust is earned, and in this atmosphere of disbelief, action will speak much louder than words.

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