Towards a Future Canada Driven by Blockchain and Crypto

Canada is a leading voice and has the potential to be pivotal to the global blockchain and crypto landscape. Before I tell you why, let me first tell you my story, the challenges I’ve experienced, and why I believe in Canada’s capabilities to succeed in this emerging fintech sector. 

I’m a father with a young son. In my former work life, I built operational strategies as a management consultant to help traditional financial institutions, such as banks, be more effective. I’ve also led technology transformation within a major Canadian bank and helped them to expand into several new countries. The commonality in my previous roles was identifying pain points that resulted in wasted resources and implementing process solutions to drive efficiency. Reducing cost and improving speed is vital to traditional finance, or so I thought.  

The harsh reality I’ve learned from years of working in traditional banking is that the system needs a revamp. Many in Canada are currently underserved by the existing banking system, as many as 15% according to some estimates, with others being excluded entirely. Those with access face costly administrative fees, limited choice of banking providers, and lengthy settlement times for transactions. For the 21st century, this simply isn’t good enough and is a failure of the banks to deliver for the Canadian economy and its 40 million people. 

I used to believe these challenges could be overcome by problem solvers, such as myself in my younger years, who were monitoring the latest technological advances and implementing strategies to drive efficiency. However, I’ve increasingly grown skeptical that the existing financial system can, and is willing to, overcome these shortcomings without the support of an emerging technology and asset class: blockchain and cryptoassets.  

How can Blockchain and Crypto Help Drive Canada’s Economy Forward? 

A committee within the Canadian House of Commons recently stated that blockchain technology could create significant long-term economic opportunities, including job creation, within Canada. I couldn’t agree more with this statement and I believe we are just scratching the surface of the improvements blockchain can provide.

Blockchains are transparent, permissionless, and instant by nature. Practically, this means that anyone can send a transaction without relying on a third-party intermediary and that once the transaction has been confirmed, it is publicly visible for everyone to see.

Blockchains are open networks available for everyone to participate in. It strips away the monopoly that a small number of large companies have in providing for our financial needs. Why is this important? In 2022, I was denied Long Term Disability insurance from a major Canadian bank. As a cancer survivor, Long Term Disability is how I would support my family if the cancer ever were to recur. One would think I was rejected due to my health, but instead, it was my occupation. According to those running the traditional system, working for a cryptocurrency exchange, even a reputable company within the industry, is grounds to be denied access to their services. Blockchains can help us ensure everyone has access to financial services and reduce their reliance on costly intermediaries.

Blockchain transactions are instant and allow digital money to move in the same way as cash. Today, most online purchases in Canada are completed using credit cards, where a system of chargebacks means that any transaction is not truly complete until months after the charge is made. With chargeback fraud on the rise – a US study suggested that chargebacks are a problem for more than 30% of SMBs – businesses must spend time and effort disputing chargeback fraud, with the bank operating as the judge and jury. Even worse, some payment rails have no clear mechanism to even dispute a chargeback.  

This is just the tip of the iceberg. The potential for blockchain technology goes far further. It could be applied to making voting systems more transparent, healthcare records more secure, or even speeding up the process of transferring ownership of assets (such as cars) between parties, something that is currently being tested by the California State Department of Motor Vehicles. 

To unlock these many societal benefits, Canada needs to more fully embrace this emerging technology. Most vendors and suppliers today are not capable of accepting transactions in the form of cryptoassets. Furthermore, the majority of Canadians still have never purchased cryptoassets for themselves. But over time, as adoption continues to grow, more Canadians will become comfortable transacting with cryptoassets. 

12 Years After Bitcoin, Where is Canada on Embracing Cryptoassets? 

Firstly, Canada is already ahead of the pack with regard to the crypto ecosystem. We have a competitive advantage that can be fully capitalized on. For example, crypto engagement is comparatively strong among everyday Canadians, especially compared to their international counterparts. Data from the Ontario Securities Commission (OSC) indicates around 13% of Canadians already own crypto, whereas ownership of crypto in the United States and United Kingdom hovers around 9%. 

Canada’s securities regulators have already outlined a clear pathway for how crypto companies can continue to serve their Canadian clients within the regulatory guardrails. This enabled businesses like Kraken – now known as Restricted Dealers – to make informed operational decisions after receiving clear guidance on the expectations and requirements needed to continue serving Canadian clients. While some businesses opted to leave the market entirely, the sector has since become more transparent and aligned around how to deliver high standards for Canadian clients. 

Canadian regulators have also signalled their intention to work collaboratively with the crypto industry as the asset class emerges. Ultimately, our regulators and good crypto actors, like Kraken, want similar things for the future of the crypto industry – more consumer protections and strong standards to avoid fraud. This ambition has been supported by a clear rulebook, which is being adhered to by crypto companies with the supervision of Canadian regulators. As such, I believe Canada’s crypto economy is well-positioned to benefit from the overall maturation of the global, borderless crypto ecosystem in the years ahead, but there are some challenges which remain.  

How can Canada Win the Race for Blockchain and Crypto Adoption?

Despite strong adoption figures and a clear regulatory framework, Canadian crypto companies continue to struggle to gain access to basic banking services. This challenge of connecting the traditional financial system with the future crypto-powered economy ultimately forms a barrier that disincentives innovation and investment in Canada. 

While it’s understandable that banking partners may be generally concerned about some fraudulent activity in the crypto sector, it should not act as an overall barrier that obstructs good actors from securing banking operations to support their business. After all, many crypto companies have strong governance, compliance and security procedures in place to mitigate risks. Therefore, it is critical for banks to avoid “blanket approaches” when assessing their crypto counterparts, instead deploying granular risk assessments and due diligence processes so that good companies can thrive.   

That said, banks alone do not hold the keys to unlock Canada’s crypto potential. I believe all industry stakeholders, including think tanks, academics, regulators, and others have a role to play in progressing the Canadian crypto economy forward. I attended the Blockchain Futurist Conference in Toronto recently and I was pleased to witness focussed discussions taking place all with the view of making crypto more accessible to everyday Canadians. For example, I spoke with someone who recognized the importance of implementing capital gains exemptions for smaller crypto transactions (such as buying a cup of coffee). Another person acknowledged how existing financial advisors need support and guidance to recommend crypto assets to their existing clients, and that many avoid offering advice for a variety of reasons. 

Both these challenges, as well as many others, must be addressed for Canada to truly succeed and economically gain from crypto adoption long-term.   

To conclude, the world my children will live and work in is certainly set to be different from the world I grew up in. Companies will prioritize candidates who have skills using AI, coding, ethical hacking, influencing, as well as blockchain. I believe crypto will be the financial system that underpins this new world and enables a broad range of industries to be more efficient and secure. As the first country to introduce a spot Bitcoin ETF in 2021, Canada is already a pioneer in this emerging space. However, we only have one opportunity to maximize this competitive advantage. Therefore, to ensure Canada can become the next Silicon Valley of blockchain and crypto, we must all invest the time and resources today to make it a long-term economic success.