What is Canada’s place in regulating bitcoin? This is the theme running through the Canadian Senate’s Standing Committee on Banking, Trade and Commerce’s study on the use of digital currency.
The Canadian Senate has already heard from the Bank of Canada, the Department of Finance, economic historians and other academics. On Thursday, April 10th, the committee will hear directly from the Royal Bank of Canada, the Canadian Bankers’ Association and the Canadian Payments Association.
The mission of this study is to understand virtual currencies. In bitcoin’s case, the question is “How do we treat this? Do we regulate this?”
The panel covered a range of topics, including wallets and bitcoin storage, the three ways of acquiring bitcoin (peer to peer, exchanges and bitcoin ATMs), and allowed for targeted testimony from Canada’s largest virtual exchange – CAVirtEX – and Ottawa-based bitcoin ATM manufacturer BitAccess, who both offered their unique perspective as business owners working daily with bitcoin on the need of government regulation.
Unfortunately, the committee hearing was cut short by a Senate vote. As a result, the first half of the presentation was testimony, followed by a live ATM demonstration.
Christopher Reed, Policy Assistant to Senator Irving Gerstein, the Chair of the Committee, was the first individual to purchase bitcoin from an ATM within session in parliamentary history when he inserted C$100 into the BitAccess machine.
The Senate is at the beginning of its 18-month long study with the objective of researching and learning about bitcoin. Seeing person-to-person transactions, as demonstrated by Kyle Kemper, a partner at the Bitcoin Strategy Group and Victoria van Eyk, a bitcoin consultant, and an in-person demonstration using the ATM was integral to this understanding as it made bitcoin more 'tangible' and accessible.
CAVirtEx’s newly hired Advisor, former Ottawa mayor Larry O’Brien, represented the exchange’s view that Canada needs to act on regulation, and fast. Regulating the 'on and off-ramps' of bitcoin is required to transform exchanges into serious businesses, with proper checks-and-balances in place to give consumers confidence in transacting with the digital currency.
Due to the last-minute vote, significant content was omitted, however.
The Bitcoin Strategy Group hopes to return in the future to focus on the day-to-day benefits of digital currencies that we can all relate to, including the opportunity for cost savings in the remittance world – where Western Union pocketed $1.1 billion in 2013 for transferring funds, mostly to developing nations – the future of micropayments and 'social tipping' for the arts and online content, and the huge benefit for retailers when using bitcoin to transact with.
In a further demonstration, the Group purchased cupcakes from local Ottawa bakery The Flour Shoppe to show the Senate first-hand that local retailers are getting on board with the digital currency, and that it is easily tradeable.
The latter part of the hearing was a robust question and answer period. Many Senators questioned the specific need for regulation.
Senator Paul J. Massicotte questioned the need for bitcoin regulation, asking if it undermined the essence of bitcoin in the first place. Joseph David, CEO of CAVirtEx responded quite quickly, stating that, if Canada hopes to remain in the bitcoin exchange business, banks need to cooperate, and that requires government regulation.
“Our only other option is going offshore.”
Education and understanding
CAVirtEx’s stance on regulation drew questions from the Senators, who wondered if the very act of regulating undermined bitcoin’s libertarian roots. One senator also brought up the possibility that regulating the currency would add so many costs that the benefits would disappear.
Kyle Kemper called for Canada to “become a global leader on the bitcoin opportunity” and pressed for increased education and understanding before implementing any regulation.
“Canada has become one of the leading countries in the world in terms of Bitcoin entrepreneurship and innovation. Before we can come to any conclusions, we must understand what Bitcoin is, how it works, and what the future with Bitcoin may look like.”
Overall, the present Senators had a better-than-average understanding of the currency and the protocol, and were actively engaged throughout the entire presentation. Their questions also touched on HST and taxation concerns, volatility risk with merchant purchases, and bitcoin’s impact on the current Canadian dollar money supply.
The question from the Senate remains: “What is necessary from us?”
Influential bitcoiners like Andreas Antonopoulos, Chief Security Officer at BlockChain.info, regularly oppose regulation, citing the ability of the community to self-regulate as sufficient for the industry.
Additionally, it was mentioned that there are already regulations in place that keep bitcoin 'in check', including FINTRAC – an independence agency that reports to the Ministry of Finance. Many large bitcoin businesses, including panelists CAVirtEx and BitAccess, follow FINTRAC regulations.
However, some senators disagreed with the idea of self-regulation, citing government regulation as “necessary” for bitcoin to succeed. Joseph David requested that bitcoin be considered a foreign currency and regulated in the same way. This comment drew interest from the assembled senators, as it was the first time the idea had been raised.
Regulation is currently a hot topic for bitcoin, as it becomes more mainstream. The recurring theme at the recent Inside Bitcoins New York conference was regulation. Indeed, the US government is also educating themselves on bitcoin: is it a coincidence that a Robocoin ATM was installed and demoed on Capitol Hill on 8th April, while Canada’s Senate were introduced to the local bitcoin ATM on the 9th?
Funnily enough, there was a complete lack of press at the Senate committee hearing tonight, as compared to the overwhelmingly attentive journalists capturing every moment of Congressman Jarod Polis’ purchase of bitcoin on Capitol Hill.
Either way, government is interested. Canada is currently in a unique position to be a leader in the bitcoin space. The country has made it this far without any regulations, however it’s time to be proactive on establishing a policy framework for regulators who are looking for guidance with this sphere.
View the full video of the Senate of Canada’s Standing Committee on Banking, Trade and Commerce’s study of virtual currencies here.
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