- For cryptocurrency to grow in Canada, there needs to be more acceptance from regulatory bodies and the community.
- Canada has made world-first innovations in the cryptocurrency space, putting it in a good position to be a world leader.
- In order to grow the cryptocurrency in Canada and realize the applications of blockchain, more capital will need to be invested in this space.
Government and regulatory bodies need to take the first step to work with cryptocurrency developers and platforms. By being more involved, they can elevate the Canadian cryptocurrency and blockchain space and encourage more entities to embrace cryptocurrency adoption.
Where would Canada place globally in terms of our cryptocurrency adoption?
Globally, we are still in a very young phase. The whitepaper for Bitcoin was originally developed and published back in 2008. The actual space has continued to get more attention over the last five or six years, but it was only in the last three or four years since the last move up in price in 2017 that cryptocurrency saw broader acceptance and awareness. We are still in the very early days of utilizing digitalized assets and value tokenization in a meaningful way. The development that continues to happen at the core is really powerful in terms of enabling different types of ideas and applications. Over the next five to 15 years, we will continue to see amazing and profound innovation in the crypto space.
“From a regulatory and community perspective, there has not yet been a broad development and acceptance of crypto in Canada compared to other parts of the world.”
Canada has so much to be proud of in this space because a large part of the original Ethereum principle was built here in Waterloo by Vitalik Buterin. A lot of the community in Southwestern Ontario rallied around this space and today, that has really spread globally in such a meaningful way. However, from a regulatory and community perspective, there has not yet been a broad development and acceptance of crypto in Canada compared to other parts of the world.
What do Canada’s early crypto developments mean in terms of our ability to innovate in this space?
Canada has always had a good track record when it comes to structured investment solutions, innovating, and being first in the world. As you know, the first exchange traded fund (ETF) was launched in Canada. Purpose Investments also just launched the first active ETF in the world. There have been amazing innovations and getting the first Bitcoin ETF says a lot about our regulators’ willingness to be thoughtful about ideas and give us a sandbox to allow for this type of innovation.
“Given the fact that Canada has some of the best developer minds, we should be leading the pack globally in terms of blockchain.”
If you step away from that though, Canada is actually behind the ball when it comes to broader regulatory thinking and in the governmental role in the development of innovation. There are a lot of other areas where we should not be so proud yet and we have a lot of things to fix. We are seeing some progress. If you go back 10 to 15 years ago, raising capital in this country was impossible for any venture idea. It was a very difficult space and there was not a lot of capital. Then, the government did some really good things with the Venture Capital Action Plan (VCAP) programs and other incentive programs from Scientific Research and Experimental Development (SR&ED) to drive capital into the system and get more people focused. Ultimately, what really does it is when people have success. To drive more capital into the system, we need to see more people winning so that people will want to put more money back into the ecosystem. There is still a lot more to be done. When you get into the blockchain space, there is a significant amount of capital available. Given the fact that Canada has some of the best developer minds, we should be leading the pack globally in terms of blockchain as opposed to being even with other countries.
What implications does the success of Purpose Investment’s Bitcoin ETF have for the future of Canada’s cryptocurrency markets?
We need to get broader awareness and acceptance first. Canada having a regulated investment fund for both Bitcoin and Ethereum will enable investors to easily access these assets. When you make investments or get access to assets, you first do more research around those assets, which then allows people to become more excited and interested in them. At a minimum, the Bitcoin ETF is going to help build awareness and more demand for the assets in time.
Being a leader in launching the first Bitcoin ETF and Ether ETFs, Canada looks good on the global scene. The criticism that is happening in the US right now around the Securities and Exchange Commission’s (SEC’s) decision not to enable an ETF is being focused on, especially since Canada has enabled this. It is really good for Canada to be seen this way but for Canada to truly win in the development of blockchains, we need to have broader innovation cycles and provide access to these areas for investors as well as from a development and application perspective.
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Do major Canadian companies have an appetite for Bitcoin or cryptocurrency in general?
We have not seen any major company in Canada stand up and take the advocacy role like MicroStrategy or Tesla has. Maybe it is the conservative nature of Canadian executives, boards, and leaders. There are not a lot of US companies that have done it either. After Tesla announced their Bitcoin investments, you might have assumed that there would be a number of other Fortune 500 to add Bitcoin to their treasuries, but we have not seen that.
“As investors, we have to recognize naysayers, why they are naysayers, and whether it is in their best interests for cryptocurrency not to succeed.”
As such, it is not a major problem that Canadian businesses do not do much signalling of their interest in cryptocurrency but there is still a lot to be figured out. You mentioned Elon Musk—he is a smart guy and ultimately people will take guidance from intelligent people who have a vision. Every innovation in history has to have early adopters. That is what Canadian institutions and governments should be pointing to. We need to ask what these early adopters know and what they see that we are missing. As investors, we have to recognize naysayers, why they are naysayers, and whether it is in their best interests for cryptocurrency not to succeed. This is what got me involved in this many years ago. I was one of those naysayers but it came from a lack of knowledge. I was talking just like Jaime Dimon was. Then, I went and actually learned about it, and by learning, it opened up my mind to what this could be. It was certainly a bet on my part that we were going to see the infrastructure built and the marketplace develop the way it has. It was a bet but you have to make those bets as leaders. Canadian leaders and organizations are phenomenal, but Canada needs more leaders to apply their vision to their industries on how blockchain can help them compete, innovate, and deflect against major disruptions in the future.
Where does Canada stand in terms of developing the technology for cryptocurrencies?
Blockchain enables a fact-based, undestroyable ledger that is decentralized. It is powerful and Bitcoin can get lost in that because Bitcoin is both the name of the token and the blockchain platform. Whereas with Ether, you have Ether tokens and Ethereum, which is the actual blockchain ledger in the background.
Blockchain technologies are powerful. I have been involved in this space for a number of years and have seen some ideas around private blockchain and things like that, which make sense. If you go back to the internet, there was this concept of the intranet, which is a private internet. There were things in the private world with companies building their own internet. Today, all that has gone away and merged into the internet so everyone is on an open platform. Over time, there will be more development of blockchains as the scaling capability of platforms grow. More people will just build on the major platform and these private blockchains will go away.
“Canada needs access to great capital in order to lead in the blockchain space.”
Canada is not ahead of the curve in terms of blockchain but we should be because we have great developer minds here. Early on, we had a very high concentration of developers in this country, but that is mostly dispersed now. People are working on the Ethereum platform globally. That innovation is being led on a global basis today as opposed to just coming out of Southwestern Ontario. The majority of work that continues to happen is still at the platform systems stage, but there is so much more opportunity. There is a lack of entrepreneurs thinking about the applications and businesses that can be built on top of these platforms. This is going to be an exciting space, and Canada can lead on that. Canada needs access to great capital in order to lead in the blockchain space. We need smart capital that has a deep thesis in this space. There are people like Boris Wertz from Version One in Vancouver who are deeply focused on this and are making great investments. Companies like Dapper Labs are doing some really cool things that are Canadian and we should be proud of that. Dapper Labs has a globally renowned platform now, but we need more of them and more capital. We need more venture capitalists in this space. Canada needs more strategic capital thinking about how to deploy capital in this space for us to take our share of the opportunity. If we want to win, we need to have a government aligned with capital, strategic thinking, development, and education. All of these aspects have to come together and build a meaningful position for Canada to take a leadership role globally as opposed to just being a part of a pack.
What are your recommendations to Canada’s governments and regulators to help us keep up with developments in cryptocurrency?
The silliness of the regulatory structure on the exchanges has to be changed. The Canadian government needs to be more accepting of exchanges and custodians working within the country as good actors as opposed to having to work offshore in nonregulated forms. The Bank of Canada needs to take a more active role in thinking about how blockchain technologies and digital currency models can be applied. They are looking at central bank digital currencies but these are just a central currency, which is what we have today. I do not see it as unique. They need to be more involved in figuring out this native currency which could be a very interesting and important tool for them to apply themselves to. The federal government also needs to be more engaged on two fronts. One is on how decentralized finance and blockchains will play a role in open banking and in the future of finance. They need to be more engaged in thinking about that. Our Finance Minister and Department of Finance need to be more focused on innovating open banking, which is a really important thing that we are way behind on in Canada. Lastly, the federal government needs to be more involved in creating programs to fund and support capital formation, innovation cycles, and the developer community around these technologies to win in building the intellectual property and applications of the future.
In 30 seconds, who would you pitch to improve Canada’s position in cryptocurrency, blockchain technologies, and fintech?
I would pitch the Canada Pension Plan (CPP). We can spend all the time in the world with the government and the Bank of Canada, but they will be stuck in their own ways and be fearful and dismissive. I would pitch the CEO of the CPP to take cryptocurrency seriously and allocate substantial capital to its innovation segment. Their leadership would result in other major pools of capital deploying capital in the space, which would expand the basic need of capital to drive development.