Bill C-249

Encouraging the Growth of the Cryptoasset Sector Act

An Act respecting the encouragement of the growth of the cryptoasset sector

This enactment requires the Minister of Finance to develop a national framework to encourage the growth of the cryptoasset sector and, in developing the framework, to consult with persons working in the sector who are designated by provinces and territories. The enactment also provides for reporting requirements in relation to the framework.

[Jaime Leverton, Chief Executive Officer, Hut 8 Mining Corporation]

Thank you, Chair and members of the industry committee, for having me here today.

My name is Jaime Leverton, and I am the CEO of Hut 8.

As we begin, I would like to acknowledge, on behalf of Hut 8, that our corporate office is located on the unceded territories of the Anishinabe, Wendat, Haudenosaunee, Mississaugas, and the Mississaugas of the Credit First Nation. This land, as well as other territories across Turtle Island that Hut 8 operates in, continue to be home to diverse indigenous peoples who we recognize as contemporary stewards of the land and vital contributors to our society.

Hut 8 is one of North America's largest innovation-focused digital asset mining pioneers and high-performance computing infrastructure providers. It is the only dual-listed digital asset miner with 100% Canadian operations. We have the highest unencumbered self-mined inventory of Bitcoin of any digital asset miner or publicly traded company globally. We are also the first Canadian digital asset mining company to list on the Nasdaq.

Hut 8 was named after the building at Bletchley Park in the United Kingdom, where Alan Turing created the Bombe, a machine that could quickly crack the Enigma code and intercept enemy communications during World War II. Turing's world-changing work in Hut 8 saved countless lives and transformed cryptography as we know it. His advances in code breaking laid the foundation for blockchain technology as it stands today.

I'd like to start by emphasizing the strength of talent we have in this innovative industry, based right here in Canada. Hut 8 is a Canadian success story. We're proud of our roots. Each member of our executive team comes to Hut 8 from other established industries. In fact, our seasoned executive, 40% of whom are female, have a collective century of experience leading businesses in other established Canadian industries.

Hut 8 is the exemplification of the innovation economy. As seasoned leaders we're applying our knowledge and expertise to help drive the growth of Bitcoin adoption and blockchain in Canada and around the globe. We are very much in the nascent stage of understanding the potential of blockchain adoption and the positive effects it promises to have on Canada's economic sectors. However, with a laser focus on regulating, with the end goal of driving innovation, the Canadian government has a generational opportunity to take a leadership role in driving both Canadian and global adoption of blockchain technology. These hearings are a great first step toward achieving that unique position.

We are proud to be taking part in your study and believe that collaborating with industry to achieve our mutual goals is very encouraging. In addition to abundant talent, Canada also has abundant natural resources to support Bitcoin mining, which in turn stabilizes the blockchain. Many miners in Canada harness the country's hydro and nuclear energy sources to power their operations. On our end we use Canada's natural cooling system, our cold winters, to minimize heat and mine much more efficiently than many of our global peers. It's not well understood that Bitcoin mining can also help stabilize energy grids, which is something other large, industrial-scale workloads simply cannot do.

At our Medicine Hat facility, for example, we work with the city to manage energy consumption in real time. If the city needs us to power down to meet residential and industrial demand because of a storm or peak usage, we can do so in less than two minutes, and power back up just as fast, ensuring the most efficient and consistent use of the available energy. We are also proud to be one of the largest taxpayers in the city of Medicine Hat.

While innovation can go a long way to improving environmental goals, so too can bold corporate leadership. Hut 8 is committed to achieving carbon neutrality by the end of 2025. We're proud of this ambitious target that is a shared priority with our government.

As you've heard over the past few meetings, blockchain has a wide range of potential applications that can change how we do things across many industries. Advancements in blockchain technology will happen with or without Canada. While we were disappointed in the defeat of Bill C-249, I'd like to thank the committee for conducting this study and taking recommendations for how to best regulate the space with the goal of growing the sector while protecting consumers.

We hope the future of digital asset regulation in the country works within our current financial system to improve financial inclusion. We're all working with regulatory bodies and authorities, but as a country we need a concrete framework to protect consumers, attract investment, innovate and grow the economy.

Bitcoin and the blockchain represent a new level of both the Internet and the global financial system, one that empowers individual freedom that traditional banking services cannot provide. Like in any industry, bad actors exist, and fraud cases like we are currently seeing with FTX emphasize the need for co-operation between government and business. We've heard a lot about risk and consumer protection in this study. I think it's important to note that while digital assets like Bitcoin have lost significant value in the past nine months, this is not entirely abnormal. Many securities fluctuate in the same way, yet we don't use that rationale to stifle venture capital investments.

The UN has estimated that up to 5% of global GDP, equivalent to $4 trillion U.S., is used for money laundering and illicit activity, which is 400 times more than the criminal activity across all cryptocurrencies.

At Hut 8, we understand very well the cyclical nature of Bitcoin, which is why we have an investment strategy to hold our digital assets. Our business is a long-term play operating on the belief that digital assets like Bitcoin and technologies like blockchain have tremendous growth potential and applicability as the innovation economy takes shape.

Simply put, with the right regulation and a laser focus on driving innovation, Bitcoin and blockchain technology stand to benefit most major industries around the globe. Digital assets should be regulated and treated as personal property. By focusing on the end user, we are able to ensure that we keep the rights and needs of Canadians in mind, which is crucial.

We look forward to submitting our recommendations to this committee on what a future regulatory framework might look like.

Thank you. I look forward to your questions.

[Koleya Karringten]

A good step would have possibly been Bill C-249, if that's what it was called. It's just being able to start opening up the dialogue around this industry, and these conversations and topics—to have better education, directly from our industry to government, so we can be part of supporting any legislation or bills coming into place for the industry.

It's important to note that this industry is not only non-partisan but also one of extreme innovation. We're innovating in the financial service, supply chain, agriculture and energy spaces. It's difficult for me to specifically state any legislation that would be able to go...in terms of supporting it, because.... Being on the enterprise, cryptocurrency mining, and decentralized finance or fintech sides, I wouldn't be able to state anything in particular without knowing exactly what industry you would like to focus on.

I would just say that the industry can bring trillions of dollars' worth of value to the Canadian ecosystem and create a lot of jobs, value for GDP, and technology exports going to other countries.

Encouraging the Growth of the Cryptoasset Sector Act

[The Speaker, Liberal, Anthony Rota]

Pursuant to order made on Thursday, June 23, the House will now proceed to the taking of the deferred recorded division on the motion at second reading stage of Bill C-249 under Private Members' Business.

The House resumed from November 21 consideration of the motion that Bill C-249, An Act respecting the encouragement of the growth of the cryptoasset sector, be read the second time and referred to a committee.

[Stéphane Lauzon, Liberal, Argenteuil—La Petite-Nation, QC]

Madam Speaker, thank you for the opportunity to talk about Bill C‑249, an act respecting the encouragement of the growth of the cryptoasset sector. I would also like to thank my colleague from Calgary Nose Hill for bringing this important matter to our attention.

This bill would require the Minister of Finance to develop a national framework to encourage the growth of the cryptoasset sector and, in developing the framework, to consult with persons working in the sector who are designated by provinces and territories. I believe this bill merits careful study. I realize that it is well-intentioned, but we must also consider the risks it poses to the country and to all Canadians. Financial innovation can certainly provide significant benefits, such as making payments more efficient, offering a broader range of services and reducing costs for consumers. This change may also make financial services more inclusive and more responsive to the changing needs of consumers and businesses.

In fact, on March 22, the government announced its intention to move forward with open banking in Canada. Open banking, or consumer-directed finance, is a system that enables consumers to transfer their financial data between financial institutions and accredited third parties in a secure and consumer-friendly manner.

Modernizing the open banking system and payment services will benefit consumers and businesses by offering more choices in the financial services sector at lower cost. These initiatives will also enhance the security and soundness of the Canadian financial system. The government remains committed to modernizing payment services in a way that is responsible and prudent. This modernization must benefit Canadians while maintaining the security and integrity of the financial system.

However, getting back to Bill C-249, it is important to understand that, while cryptoassets are innovative financial products, they pose very significant risks to consumers and to the security and integrity of the Canadian financial system.

The recent protests in downtown Ottawa and at border crossings across the country are an excellent example. Indeed, cryptoassets greatly contributed to funding the protests, which threatened the country's national security for several weeks. Without a doubt, it is vital that any regulatory regime governing cryptoassets balance innovation in the financial system with any possible associated risks in order to ensure that our financial system is safe and secure and benefits all Canadians.

This bill merely seeks to promote growth in this sector, but this approach definitely does not serve the fundamental interests of Canada.

I will now speak about cryptoassets and illegal activities. I would like to remind my colleagues that cryptoassets play an important role in facilitating illicit activities such as fraud, cybercrime and money laundering, among others. This is because not all cryptoasset transactions are subject to the same rules to counter money laundering and terrorist financing, or to the same consumer information requirements.

It is important to understand that cryptoassets are decentralized and based on blockchain technology. This means that cryptoasset transactions can take place beyond our borders, either on numerous exchange platforms, of which there are eight at present, or on peer-to-peer exchanges. Clearly, this creates significant risks for the consumers and investors who participate in these activities. For example, the lack of a framework to protect consumers and investors makes them more vulnerable to fraud.

We were reminded by recent protests in Canada that were financed with cryptoassets that there is also a real risk for our national security. Unfortunately, Bill C‑249 does not address any of these risks.

Instead of blindly supporting the growth of cryptoassets, I think the government should focus its efforts on finding solutions and properly take into account the role that cryptoassets play in facilitating illicit activity.

What is more, given the more global nature of cryptoassets, I think the government needs to work with the provinces to adopt an approach to cryptoassets that is consistent with international standards and best practices. By adopting such an approach, we would limit the risk to Canada's financial system and protect the interests of Canadians.

In conclusion, imagine if every senior had invested their savings into cryptocurrency on the recommendation of the Conservative leader. What position would they be in today?

The bill introduced by the member for Calgary Nose Hill raises some rather complex questions. To me, the main problem is that Bill C‑249 seeks exclusively to encourage growth in the cryptoasset sector, without taking into consideration the major risk it poses to the financial system and Canadian consumers.

As I was saying, cryptoassets play a major role in facilitating illicit activity such as fraud, cybercrime and money laundering, among others. Recent demonstrations across the country are a good example. We have to assume that there is always a risk.

It would make more sense for the government to work on a comprehensive approach to the regulation of cryptoassets that would both support growth and limit the risks to the financial system and consumers.

According to the Conservatives, cryptocurrency is still a good investment. The recent drop in cryptocurrency would have jeopardized the investments of middle-class families and seniors. However, seven months ago, during his leadership campaign, the leader of the Conservative Party encouraged Canadians to avoid inflation by investing in cryptocurrency.

Today, we know that sound financial management does not involve cryptocurrency. Right now, our government is taking a more comprehensive approach and working to more strictly regulate cryptoassets in order to support growth, limit the risks to the financial system and help consumers. Today's cryptocurrency will do nothing to balance consumers' investments.

I am grateful to have had the opportunity to talk about cryptocurrency. I hope all members will unite to vote against this bill.

[Larry Maguire, Conservative, Brandon—Souris, MB]

Madam Speaker, I welcome the opportunity to speak to Bill C-249. The member for Winnipeg North's speech is a fine reason why the Liberals are dropping in the polls in popularity with Canadians. I wonder if he would say the same thing about any other tradeable asset in Canada. After all, Canada does depend on trade and regulations.

First, before I get into the speech on why we need to move forward and have an open view of getting this bill to committee, I want to thank my good friend and colleague from Calgary Nose Hill for introducing this very important legislation, as was said by the other members as well. Her passion and zeal for good public policy is to be commended. She has an innate ability to cut through the claptrap and get straight to the point. She is results-oriented and always comes to the table with a plan. Her private member's bill is a great example of just that.

I know she has carefully crafted the legislation to allow the Standing Committee on Finance ample room to put forward amendments once expert witnesses have had an opportunity to testify. Unlike some legislation with crafters that guard against any amendments, my colleagues in the House will find that the hon. member for Calgary Nose Hill is ready to work with everyone.

This legislation will start the conversation about how the Government of Canada can begin the process of developing a national framework to protect investors and to encourage the growth of blockchain technology across the country. None of us is so naive as not to notice the recent uptick in media coverage on cryptoassets. The markets are down. Some NFTs have failed spectacularly.

When cryptocurrencies are being written about by political commentators, we know they have finally broken through to the mainstream. With the recent collapse of FTX and the financial fallout felt by many, there is no better time for Parliament to start this conversation.

Those involved in the industry want a regulatory system that will help them build trust, and that is a key point. They want a system that will provide clear guardrails and more stability for all those involved. Legal clarity and better education will lead to more innovation. I also want to stress that we cannot let this issue get polarized to the point that it becomes too toxic to discuss.

The fact that the industry is being disparaged for political reasons is short-sighted and thoughtless. I would encourage all my colleagues in the House to go back to their respective caucuses and stress the need to support this bill and to turn down the rhetoric. I will tell members why as we move forward.

During the first hour of debate on this bill, my colleague from Calgary Nose Hill laid out a compelling argument for why it is time for the Government of Canada to start working on a national framework. As she said in her speech:

Many innovators and proponents of cryptoassets in Canada are actually calling for the federal government to use its convening power to provide policy clarity to the industry. The current lack of clarity, particularly on safeguards to protect those working in the space, is seen as an impediment to investment.

Across the country, there is a mix match of policies. While we respect the jurisdiction of the provinces, the federal government can help facilitate a much more harmonized set of policies for cryptoassets. There are some recent examples of this happening in other countries.

Recently, the President of the United States issued an executive order for the federal government to start drafting a plan. The EU has also started working on a plan so that various countries and industries are in sync. The acceptance and use of cryptoassets is on the rise. That includes cryptocurrencies, utility tokens, security tokens and stablecoins. Cryptoassets will only continue to grow in prevalence in the years ahead.

According to the latest statistics, close to 5% of Canadians now own a cryptoasset. Across the globe there are now thousands of cryptoassets, and more will be made available in the years to come. Regardless of whether someone wants to invest in or purchase a cryptoasset, hundreds of thousands of Canadians are currently engaged in the industry. It is about time we started to think about a national framework and to get various jurisdictions working together.

The Canadian securities administrators are now working in collaboration with the investment industry. They even released guidance for platforms to ensure they are in compliance with regulatory requirements. Securities regulators in individual provinces are now starting to regulate crypto-trading platforms to protect Canadian investors. Last week there was a meeting on Parliament Hill with many of Canada's leading blockchain companies. It was encouraging to hear how they too want to start engaging with policy-makers.

In Canada, we have some of the best and finest innovators in this growing industry. They have the talent and the solid foundation to further expand their operations. They are optimistic about the future of blockchain technology. Our government should also have the same optimism and can-do attitude. What we do not want to see happen again are more lost opportunities, such as when Ethereum, which was mostly designed and developed in Canada, moved to Switzerland.

Other countries are quickly realizing the potential of the entire industry and are quickly seizing this moment. As companies are looking around at countries in which to set up shop, I want Canada to be at the top of their list. I want Canada to be known as a jurisdiction where governments work with and listen to those in the industry, while also educating the public and protecting its investors.

Those in the industry are already talking about making our country a blockchain hub. They see this technology as a way to have a more transparent Internet, and one that will help drive better skills training for the jobs of tomorrow.

The Web3 economy is here and as Morva Rohani, the executive director of the Canadian Web3 Council said, “blockchain and related technologies have unleashed a wave of innovation and creativity for a generation of entrepreneurs.”

The key to this speech is that, at its core, this is what this bill is all about. As the industry grows, I want to see those jobs and the wealth created by those innovators' ingenuity stay right here in Canada. I want Canada to be the best place in the world for the Web3 economy and blockchain innovation.

As with many new innovations, they have the capacity to be used in many ways that were never originally imagined. For instance, blockchain technology can be utilized in various financial services, including remittances, digital assets and online payments, because it enables payments to be settled without a bank or other financial institution taking a cut. Furthermore, the next generation of Internet interaction systems, including smart contracts, reputation systems, public services and security services, are among blockchain technology's most promising applications.

As the Canadian Web3 Council said during their meeting on Parliament Hill last week, blockchain technology can be used for social good. Whether it be energy, climate and the environment, or health care and even agriculture, the potential of this budding industry is endless.

In closing, I urge all of my colleagues to vote in favour of this bill. Let us send it to the finance committee and have the thorough consultations that are long overdue. I believe that it would be prudent for all of us to continue to learn more about blockchain technology. This is an exciting opportunity for the Canadian economy, for our innovators and, most importantly, to help create the jobs of tomorrow.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Madam Speaker, this morning I have the privilege of rising to speak to Bill C-249 on the cryptoasset sector, which was introduced by my Conservative Party colleagues.

This bill seeks to require the Minister of Finance to develop a national framework to encourage the growth of the cryptoasset sector within three years after the coming into force of the act.

The bill states that, in developing the framework, the minister must consult with persons designated by Quebec and the provinces and with experts from the cryptoasset sector. Bill C-249 also provides for reporting and tracking requirements in relation to the framework.

In a sector that is more ideology-driven than factual, the bill points out that cryptoassets have significant economic and innovative potential for Canada and that the government must focus on lowering barriers to entry into the cryptoasset sector, protecting those working in the sector and minimizing the administrative burden.

I will not keep members in suspense for very long. I will say right now that the Bloc Québécois will be voting against Bill C-249.

Before getting into more detail about our position, I would like to remind the House and my Conservative colleagues of some financial advice that the leader of the Conservative Party and member for Carleton gave to all Quebeckers and all Canadians last spring. It is no secret that the new leader of the Conservative Party of Canada dreams of bitcoin and other cryptoasset fantasies at night.

Barely seven months ago, in April, he organized a small staged media event when he went to a restaurant in London, Ontario, and paid for a shawarma in bitcoin. He took the opportunity to recommend that Quebeckers and Canadians invest their savings in cryptocurrency to shield their money from inflation.

What reasoning did the leader of the Conservative Party use to offer this advice?

He used a simplistic—and frankly dishonest—intellectual shortcut to blame the big bad central bank for the inflationary crisis and in the same breath presented the decentralized cryptocurrencies, regulated by the very free market, as a magic solution against inflation.

The problem with the supposed freedom of cryptocurrencies like Bitcoin is that they are also free to crash and burn. I say this with great empathy and compassion for anyone who went through this, but the outcome was quite dramatic for those who followed the financial advice of the Conservative leader by investing in bitcoin in April 2022. Just six months later, they could only watch helplessly as close to 70% of the value of their hard-earned savings had evaporated. Poof.

I would like to hear what the Conservative leader has to say to all these constituents who trusted him and who now must surely feel he has cheated, betrayed and abandoned them. While he claims to care about helping families put food on the table, how can he take advantage of his position and the credibility his role gives him to trot out such irresponsible and dangerous financial advice?

As I indicated earlier, the Bloc Québécois will vote against the Conservative bill. My colleagues and I are convinced that, while cryptoassets do have innovative potential in some regards, the regulatory framework around them must be fleshed out and strengthened so as to make the digital and financial ecosystem in which they operate more transparent and accountable.

Unlike the Conservative Party, we believe that legislative action focused strictly on the growth of the sector, as proposed in the bill, on lowering barriers to entry, and on minimizing the administrative burden would be inappropriate and irresponsible.

The sector has experienced indisputable and dramatic growth in recent years. What it really needs now is not support for growth but a real regulatory framework that limits the risks associated with possession and transactions of cryptoassets.

There are still many issues that require us, as decision-makers, to act with caution and diligence in this matter.

The first issue is, of course, the volatility of cryptocurrencies, which is still extremely high and often inexplicable. It can be correlated to media exposure, and an event as trivial as a simple tweet has previously caused fluctuations of several thousands of dollars in just a few hours for some currencies.

That is why many professional investors see the use of cryptoassets as more of a lottery than a serious investment. Similarly, Paul Beaudry, Deputy Governor of the Bank of Canada, considers them to be more of a tool for speculation than a real means of payment, as its supporters want to present it.

Another issue that cannot be overlooked when we talk about cryptoassets is energy consumption, which ultimately leads us to energy production. That certainly is in the Conservative Party’s wheelhouse. To put it simply, cryptoassets are created by mining. This is not mining from the earth, but rather mining done by many very powerful computers operating at full power to perform extremely complicated calculations.

It is also estimated that the total activity generated by cryptomining uses as much energy as a country like Norway, about 130 terawatt hours. By comparison, Hydro-Québec's electricity sales only reached 50 terawatt hours in 2020. I think that we will have to reflect on what we really want to focus on and what we want to do with our energy production.

It appears euphemistic, then, to say that cryptoassets are energy intensive. As Europe is going through an energy crisis, we must ask ourselves whether priority should be given to these activities rather than heating our homes, schools and hospitals. Moreover, the environmental impact of these activities must not be forgotten. For jurisdictions that do not have the opportunity to produce clean energy like Quebec, the pollution caused by cryptomining is extremely significant.

The third issue regarding cryptoassets, which we cannot ignore, is their use to finance criminal and terrorist activities. There is a real and documented possibility of taking advantage of the cryptoasset sector to launder money and finance terrorist activities due to two aspects inherent in these activities: anonymity and the proliferation of instant transactions.

The launderers take advantage of this sector operating outside of conventional banking systems to convert the proceeds of criminal activities into legal tender. There currently exists a regulatory vacuum, one which organized crime certainly takes advantage of.

I will give a concrete example. At this time, current legislation allows people to convert up to $1,000 per day into cryptocurrency at an automated teller machine without having to verify their identity. There are currently no fewer than eight companies that operate such machines in Quebec and a single person can exchange several thousands of dollars per day. Obviously, this is a real boon for criminal organizations.

Terrorists can use it for similar reasons. Since it is difficult to identify the actual recipient of a wallet, money can be transferred from one side of the world to the other to finance terrorist activities without alerting the authorities responsible for our protection. So much for this party claiming to be the champion of law and order.

My time is coming to an end. I will conclude by reminding you that the cryptoasset sector has grown by leaps and bounds over the past few years. However, there have been bumps along the way, and it is now clear, given the crash of bitcoin and several other cryptocurrencies, that it is better to be cautious and responsible when it comes to this technology, which is a minefield of risks and uncertainties.

Unlike the Leader of the Conservative Party and his party members, who seem to be looking at cryptoassets through rose-coloured glasses, the Bloc Québécois prefers to focus on transparency and responsibility. We are—

The House resumed from April 5 consideration of the motion that Bill C-249, An Act respecting the encouragement of the growth of the cryptoasset sector, be read the second time and referred to a committee.

Opposition Motion—Measures for Immediate Financial Relief

[Luc Thériault, Bloc, Montcalm, QC]

Mr. Speaker, the Conservative motion calls for action to tackle money laundering and yet, at the same time, the Conservatives also want more investments in cryptoassets, which facilitate money laundering. I am talking about Bill C-249. I am also thinking of one of the leadership candidates who is very much in favour of cryptocurrency.

How does the member reconcile that?

Encouraging Growth of the Cryptoasset Sector Act

[Jean-Denis Garon, Bloc, Mirabel, QC]

Madam Speaker, I would like to begin by thanking the member for Calgary Nose Hill for Bill C-249, which is a subject that I find to be most interesting.

The bill is about cryptoassets, cryptocurrencies and virtual currencies. It is truly fascinating because it covers extremely innovative technologies that are being adopted by the more formal economy. We know that cryptoassets and cryptocurrencies are based on transactions authenticated by blockchains. These transactions can take place person to person and on the web, but without any intermediary. It is understandable that those who love technology, especially in the banking world, are fascinated by this and why we can see that there are a certain number of significant risks associated with the development of cryptoassets.

Bill C-249 is basically a bill that promotes cryptocurrencies. One of its main objectives is to ensure the growth of cryptocurrencies. This is one of the fastest-growing sectors, and the market is already doing the work on its own. It is not like Alberta's oil. We do not need public money for it. The industry is self-sustaining.

The bill then talks about the need to lower barriers in a sector to which there are no barriers. This is about regulation. This is an incomplete bill that starts to unravel from the very beginning. The bill then claims we must minimize the administrative burden in a sector where there is virtually no administrative burden.

I do want us to talk about cryptocurrencies. I want us to analyze the sector and consider the state's role and the need for regulation, but this is not a great start. To me, Bill C‑249 sounds like an ad for cryptocurrencies.

This brings me back to yesterday's speech from the Conservative member for Abbotsford. I am bringing this up today because it really stood out to me. Yesterday during the Conservative filibuster, when the member for Abbotsford talked about all the criticisms he made during the prebudget recommendations, I was quite surprised to hear his comment. I was at the Standing Committee on Finance. The committee was discussing the prebudget recommendations and the member for Abbotsford did not make a single recommendation. This year, the Conservatives did not propose a single recommendation. They proposed nothing.

We brought in our witnesses—people from Davie in Quebec City, which still does not have its fair share of federal shipbuilding contracts, our farmers, our community organizations and our businesses, all of whom offered up proposals to stabilize our supply chains—and we made proposals, but the Conservatives had nothing, nothing at all.

Yesterday, the member for Abbotsford said something in connection with Bill C‑249. He said that when parties have pre-budget recommendations—which they did not, of course—they have to set priorities, practise statesmanship and start with what is most important. To me, given the current conditions, the economic recovery, coming to the end of the pandemic and having so much work to do, I am surprised that the Conservatives would use their time in the House to introduce this kind of bill.

Speaking of setting priorities, I decided it was important to get out there and talk to people dealing with the negative repercussions of cryptocurrencies. Such people exist, and I wanted to hear what they had to say. I think it is worthwhile, especially as I also think we need stricter regulations and Bill C‑249 is noticeably lacking.

Consider the Vancouver police, for example. It does not get much more hands-on than those folks. They believe that cryptocurrency ATMs are being used as conduits to move the proceeds of crime. That worries me. The lack of regulations in this area worries me.

As my colleague from Lac-Saint-Jean said earlier, the Toronto police have also indicated that cryptocurrencies in general are problematic. They are known to be a money laundering tool that can facilitate criminal transactions, such as the sale of narcotics and guns, and that is certainly what has materialized.

The member for Calgary Nose Hill was saying that although this is true, any payment method can be used for the same purpose. However, there are varying degrees of ease. Person-to-person transactions without intermediaries and without state regulation make things easier. I am very surprised that Bill C-249, without any hint of a regulatory proposal, comes from the law and order party.

The U.S. Department of Justice has just created a new director position to tackle fraud specifically involving cryptocurrencies. That is in the United States.

In its budget, which was just tabled, Quebec highlights the need to better protect Quebeckers against cyberthreats and expresses the will to combat tax evasion strategies more effectively, which reflects a willingness to do the hard work to ensure that the cryptoasset sector develops in a secure and fair environment for all. That is what the Quebec government is saying, and, in this place, we defend Quebec's interests.

For its part, the IMF, which is attuned to the issue of global monetary and financial stability stated the following:

Crypto assets and associated products and services have grown rapidly in recent years. Furthermore, interlinkages with the regulated financial system are rising. Policymakers struggle to monitor risks from this evolving sector, in which many activities are unregulated. In fact, we think these financial stability risks could soon become systemic in some countries.

Based on what the IMF experts are saying, I feel that they have placed the cart before the horse by introducing a bill that is essentially a tool to promote an industry that is already doing very well.

There is a host of risks for consumers. I like that the title of the bill refers to cryptoassets. We have stopped calling it “cryptocurrency” because it is not really currency and it does not play the same role as currency. It will therefore not replace currency.

Currency is a store of value. Its purpose is to retain value. However, cryptoassets are assets that fluctuate tremendously based on factors such as speculation. This makes the ill-informed investors—if we can call them that—who put their money into them more vulnerable.

Currency is also a unit of account. Until Quebec becomes independent and starts using the Quebec dollar, we will still use the Canadian dollar, which does the job very well. In fact, the value of cryptocurrencies is still assessed against the Canadian dollar. It is also a medium of exchange.

Cryptocurrency also functions as a medium of exchange, but it is a very decentralized medium that can, as I said earlier, facilitate criminal transactions, under-the-table transactions and many others. The fact that it is decentralized makes it all the more important to regulate it. I am worried about that, and so is the Bloc Québécois. We know that we are not the only ones who think that way.

Paul Beaudry, the deputy governor of the Bank of Canada, spoke to us about bitcoin. We know that there are a lot of different cryptoassets and cryptocurrencies, but he told us that Bitcoin was more for speculation than for payment. If we have reached the point where the Bank of Canada is worried about these issues, then perhaps we should be asking the Bank of Canada whether this bill addresses its concerns and meets its expectations. I would venture to say that the bill does not.

I now want to talk about our support for the bill. This bill is at second reading, the stage at which we vote on the principle of the bill. This bill could be improved, and my colleague spoke about that. It could be amended in committee. However, given the need for a framework, for regulations and for consultations with stakeholders, I strongly believe that we would end up having to rewrite the entire bill by making the amendments we would be comfortable with.

The bill would be rewritten so much that I do not think the amendments we would want would even be in order as part of the committee's study of this bill. We therefore think that it might not be a constructive use of parliamentarians' time to send this bill to be studied in committee. For these reasons, the Bloc Québécois will very likely not be able to support the principle of this bill.

[Jenna Sudds, Liberal, Parliamentary Secretary to the Minister for Women and Gender Equality and Youth]

Madam Speaker, I am thankful for the opportunity to speak today on this important private member's bill. I want to thank my colleague across the aisle, the member for Calgary Nose Hill, for bringing the bill to the House of Commons.

How Canadians use money and make payments is changing, thanks to the emergence of new digital technology. Bill C-249 seeks to understand the benefits of cryptocurrencies and these new technologies. I commend the member opposite for inspiring discussion on this emerging economic sector. This is an important debate to be had.

I first want to highlight the benefits that cryptocurrency has on Canada's economic growth and the future of money in our country.

Billions of dollars of wealth has been created in the cryptocurrency space. Companies are getting on board. Walmart, Reebok and IBM have implemented crypto and blockchain solutions to maintain the transparency and integrity of their supply chains. Internationally, cryptocurrency is a useful tool. After the illegal invasion of Ukraine by Russia, the Ukrainian government pivoted to accept donations of cryptocurrency to fund its military defence and humanitarian aid. They raised over $100 million in support.

Even residents in my riding use cryptocurrency for personal investment opportunities, and I am sure the same can be said for constituents in ridings across our country. It is a popular and growing investment. There are undeniable benefits to cryptocurrency, and the hype to invest is certainly growing. However, the sector does remain under-regulated.

Governments around the world have their work cut out for them to craft legislation and regulate this new technology. Bills like Bill C-249 make important contributions to the debate on how to regulate cryptocurrency. However, I am concerned that it is narrow in scope. While it certainly highlights the benefits of cryptocurrency, I am concerned that it does not necessarily address the risks involved in the cryptoasset sector. Specifically, it does not address the potential vulnerability and financial instability inherent within the cryptoasset industry. These risks, vulnerabilities and instabilities need to be accounted for as we move forward.

As we transition into a digital world, governments must ensure that cryptoassets have proper oversight. Things like cybersecurity provisions must be established for these sectors. Simply, as cryptocurrencies rise in popularity, Canada needs the proper regulatory infrastructure in place to guide, shape and inevitably regulate the growth. Without these safeguards, we put the safety and security of Canadians at risk.

Of utmost concern to me is that we cannot overlook the dark elements that can be a consequence of the unregulated growth of cryptoassets. Around the world, people in the black market are trying to legitimize their wealth by venturing into the crypto space. This illegal and unregulated activity has posed unintended, or perhaps intended, consequences to economies and democracies around the world.

Over the last month, we have seen the Russian oligarchs use cryptoassets to circumvent western economic sanctions and enable the illegal invasion of Ukraine. This allows Russian oligarchs to preserve their wealth amidst the Russian economic crash. It is undermining the international community's economic sanctions and, most importantly, it is enabling the perpetuation of the atrocities that Russia has been committing against Ukraine.

Closer to home, there is also evidence of the use of cryptoassets in illegal activity as well. Just last month, cryptocurrency was identified as enabling the illegal occupations and blockades here in Ottawa, Windsor and Coutts. Digital currencies allowed protesters to receive global donations without any obstruction or regulation. The freedom convoy's own cryptotoken was designed in such a way as to make it difficult for our law enforcement to connect the individual donors to the actual funds, and this is an evolving problem.

Without proper regulation, the presence of cryptocurrency and its illegal activities will continue. Digital currencies undoubtedly appeal to people looking to evade the scrutiny of law enforcement. They are decentralized, which makes it difficult for government to know what is happening. To this point, I reference Matthew Burgoyne, a leading Canadian digital currency lawyer. He stated that, when faced with scrutiny, “crypto can simply be transferred to another wallet address...and it can continue to be transferred in an effort to obscure the original source, or in an effort to remove the funds as much as possible from the wallet that was frozen.”

As digital currency moves from wallet to wallet, it gets harder to track by law enforcement. Without proper regulation at the federal, provincial and territorial levels, cryptocurrency could become a vehicle for abusive transactions, facilitating money laundering, terrorist financing, criminal activity and tax evasion. Transactions involving cryptoassets are also vulnerable to fraud. There is currently inadequate investor and consumer protection for these activities.

The safety and security of Canadians' financial activities are of course always of central concern to our government. Therefore, as we move forward and we craft policy and cryptocurrency legislation, our legislation must ensure that we adequately address these risks. It cannot simply focus on promoting unbridled growth of the cryptoasset. I fear that this is what we would do with the current version of Bill C-249. Our policies must also clearly delineate the shared jurisdictions of this file. Under our constitutional conventions, the federal government must consult with the provinces and their securities regulators on possible regulations to cryptocurrencies. Currently, I do not believe that this bill would do that.

In addition, international institutions and partners also play a key role in our policymaking. Cryptoassets are a transnational asset. Regulating them requires co-operation among countries. We should ensure that international experts from other jurisdictions are included in our policy-making as we move forward.

We must understand the risks of digital currencies just as much as we understand and promote the benefits of them. Cryptocurrencies have numerous benefits locally, federally and internationally. There is no doubt of that. However, without thorough regulations being implemented, these benefits may be outweighed by the risks. There are real conversations that need to be had as citizens, as members of Parliament and as governments, on what the future of money is going to look like. Those conversations must happen sooner rather than later as more and more Canadians invest in cryptocurrency.

Although I do not believe that in its current state this bill adequately addresses those risks, I thank the member for Calgary Nose Hill for bringing this important discussion forward and being open to how it evolves as it moves through the House.

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

moved that Bill C-249, An Act respecting the encouragement of the growth of the cryptoasset sector, be read the second time and referred to a committee.

Madam Speaker, I rise today to speak to my private member's bill, Bill C-249, the encouraging growth of the cryptoasset sector act. It has been 14 years since work conducted by Stuart Haber, W. Scott Stornetta, and Dave Bayer was used by a person operating under the pseudonym Satoshi Nakamoto to launch a concept called blockchain.

Since the Nakamoto paper was published, the concepts it contained have been operationalized the world over to launch a pantheon of innovative products and practices that are revolutionizing how people interact and transact with each other. Canada’s Parliament has yet to debate the cryptoasset sector. This debate today marks the first time we are doing so.

I am going to break down the public policy challenge before us today in six parts. They are what cryptoassets are, why the sector is important to Canada, why Parliament needs to turn its attention to the sector, why this bill is the best approach for Parliament to take in the matter, problems this approach will prevent, and my desired approach to building consensus for this model.

Let us talk about the first point. What are cryptoassets? Within my bill and within my speech today, I use the term “cryptoasset” and define it as, “digital assets that are secured by means of cryptographic systems, including the blockchain system, that do not rely on a central authority and are based on algorithms agreed to by the majority of users.”

Cryptocurrencies, such as Bitcoin and Ethereum, are one type of cryptoasset. Transactions use blockchain to record transactions and issue new units, as opposed to fiat currencies that have a central issuing or regulating authority. Non-fungible tokens, or NFTs, are another cryptoasset. NFTs are digital assets that represent real-world objects such as art, music, in-game items and videos. They are bought and sold online, frequently with cryptocurrency, and they are generally encoded with the same underlying software as many cryptos.

Rather than spend the limited time I have today breaking down the technical aspects of how cryptoassets operate, I encourage colleagues who are not familiar with the subjects to spend some time watching the multitude of videos, reading the articles and looking at the other educational resources that are now available.

I will highlight, however, that a lack of education on the topic among legislators and public servants is a problem that my bill attempts to resolve. The goal of this would be to have public policy happen in an environment based on knowledge and public consultation, rather than polarized partisan interests.

Why is the sector important to Canada? First, cryptoassets represent an important sector that could help to diversify and grow the Canadian economy. To give colleagues a sense of the size of this industry, one recent report suggests that the global cryptocurrency market reached a value of $1.782 billion U.S. in 2021. Looking forward, the publisher of this report expects the market to reach $32.4 billion U.S. by 2027, exhibiting a compound annual growth rate of 58.4% from 2022-27.

The global market for another type of cryptoasset, non-fungible tokens, is expected to grow from $14 billion in 2021 to $21.3 billion in 2022 at a compound annual growth rate of 52.1%. The market is expected to reach $82 billion in 2026 at a compound annual growth rate of 40.2%. Canada should be a natural home for this type of innovation and investment.

Many view the decentralized nature of cryptoassets as an attractive feature in and of itself. By removing intermediaries from computer networks, distributed ledgers can facilitate new types of economic opportunities that were not possible before. The blockchain technology underlying Bitcoin and other cryptocurrencies has been hailed as a potential game-changer for a large number of industries.

Another common reason for investing in cryptoassets is the desire for a reliable, long-term store of value. This property makes cryptocurrency attractive to people who are worried about things such as bank failures, or so some rationale goes.

This brings us to why Parliament needs to turn its attention to the sector. As with any industry, there are massive potential benefits to Canada, as well as potential pitfalls. The call to us, as legislators, should be to find a path that promotes growth and investment in the sector within Canada, while protecting those working in the space, as well as consumers.

Many innovators and proponents of cryptoassets in Canada are actually calling for the federal government to use its convening power to provide policy clarity to the industry. The current lack of clarity, particularly on safeguards to protect those working in the space, is seen as an impediment to investment. That is to say, who would invest in a sector that is likely to be regulated at any time, but likely by people who know little to nothing about how the industry operates? The same could be said for government investment in the sector.

Further, a significant amount of jurisdiction for policy related to the sector falls to the provinces. A patchwork of rules and regulations is popping up across Canada. Provincial jurisdiction must be respected, but the federal government could have a role to play in convening provinces to establish an opt-in set of harmonized policies that would make it easier for investors to operate and to provide safeguards.

At the same time, given the newness of the sector and its rapid pace of growth and innovation, there are risks. Education to help investors evaluate risk could benefit the sector. Specifically, a broader public understanding of what is real and what is speculative mania, what is protected by government regulation and what is not, how to prevent digital asset theft, and how cryptoasset volatility occurs, could benefit the sector, as could safeguards that are present for other asset classes such as traditional securities to prevent fraud and illegal activities.

High profile instances of alleged fraud, such as the QuadrigaCX scandal, which many Canadians will be learning about via the Netflix film on the topic this week, underscore the need for what we are discussing today. Our Parliament should also be seized with this issue because other jurisdictions are well ahead of us on this matter. If we continue to lag in setting a framework for Canada, this will become an impediment in future negotiations regarding trade and will drive talent and capital away from Canada to other jurisdictions with more robust frameworks.

For example, the European Union has recently introduced its proposal for a new EU law on cryptoassets under the Markets in Financial Instruments Directive. The European Blockchain Partnership is also planning a pan-European regulatory sandbox in co-operation with the European Commission for data portability, business-to-business data spaces, smart contracts and digital identity. This will cover sectors including health, the environment, mobility, energy and more.

Last month, U.S. President Joe Biden signed an executive order directing his federal government to come up with a cryptocurrency plan. The order will coordinate efforts among financial regulators to better understand the risks and opportunities presented by digital assets, particularly in the areas of consumer protection, national security and illicit finance.

The Biden administration stated that this was in response to the explosive growth in digital assets and a desire to maintain American technological leadership. The results could shape the contours of a rapidly innovating industry, yet Canada has not moved forward in this regard. At the same time, the innovative functions of blockchain technologies and the decentralized essence of how they function should not be hampered by a lack of clarity or knee-jerk reactions from legislators.

Those who believe that cryptoassets are the means to all sorts of evils are missing the point as much as those who might profess that cryptoassets without any attached policy are the magic wand for all our ills. This is exactly what is happening here in Canada. The political debate on cryptoassets is becoming polarized before we even begin to discuss it in this place.

Some in Canada are advocating for policies that would lead to bans of many types of cryptoassets, which would be a colossal blow to a potential enormous economic boon for our country. On the other hand, some are openly advising the public that cryptocurrencies, which are volatile, currently subject to an enormous amount of regulatory uncertainty and untested as an inflationary hedge against periods of sustained high inflation, are good ways to solve Canada’s inflationary problem.

Rather than go down the path of reactionary populism or highly damaging knee-jerk over-regulation, we should choose a better way. That brings me to what my bill would do.

The bill would require the Minister of Finance to develop a national framework for the cryptoasset sector and, in developing the framework, to consult with persons working in the sector who are designated by provinces and territories. It would require the Minister of Finance to formally ensure that cryptoasset experts are leading voices in the policy development process. It would also be open to public submissions.

Given the newness of the sector, the bill would also enshrine consultation of innovators who work in the space, while asking those who traditionally have primary access to the finance minister on such matters, such as lobbyists and public servants, to engage via their traditional access routes so that a fulsome position on what the government should or should not do is developed. It would enshrine provincial jurisdiction by ensuring that any framework would be on an opt-in-only basis for the provinces, and would require the Minister of Finance to ask the provinces for input during the consultation process. This would prevent policy from happening behind closed doors in the federal government without more open consultation.

The bill takes an optimistic view of the sector, rather than pessimistic. That is, it could be an important part of the Canadian economy. Other, more pessimistic views that have been used in other jurisdictions have functionally kneecapped the space to the detriment of those nation’s economies.

The bill would ask the minister to ensure Canada remains an attractive place to attract and retain investment and talent, while protecting those who work with cryptoassets. Most importantly, rather than prescribing any particular policy, the bill would create a mechanism to formally engage the expertise of cryptoasset talent in policy development. It would require the framework to be reviewed by committees of the House and the Senate, and it would require this work to be done within a three-year period.

My rationale for putting this bill forward is to depoliticize what is becoming a polarized discussion of the space and to open the policy process to those innovators who need us to support them but also not set unnecessary roadblocks that would stand in their way. I am hoping that, if this bill passes, innovators, provinces and those interested in cryptoassets will have a clear and productive mechanism to work with the federal government to drive common-sense public policy that will see Canada become a world leader in this space.

Many innovators, cryptoasset practitioners, bankers, lawyers and members of the general public have expressed great excitement about this open and novel approach to setting public policy for the cryptoasset sector. In fact, I have had legislators from other jurisdictions around the world look at this as a novel approach to tone down the rhetoric on the subject and actually do something that resembles work, which could hopefully be duplicated on a larger scale.

One particular example that I would like to highlight, with regard to feedback, is from Morva Rohani, the executive director of the Canadian Web3 Council. She says, “Bill C-249 has launched a long overdue public policy discussion on the benefits of cryptocurrencies in Canada. The Canadian Web3 Council is supportive of the development of a national framework to encourage the growth of the cryptocurrency sector in consultation with the industry.”

I hope that this bill will give an opportunity for colleagues of all political stripes to educate themselves on cryptoassets and to develop their party’s particular policy stances on the challenges and opportunities the sector presents to our country from a place of knowledge and sound judgment, rather than populism or knee-jerk reactions to regulate away anything new.

To that end, I want to state to all members of the House that I am open to amendments to this bill. I tried to present a framework that could be rigorously reviewed by the finance committee members and witnesses, with constructive amendments to be made on the scope or content provided. If a colleague wants the bill to do more, I encourage them to take it to committee and to amend it.

I hope that colleagues will evaluate this bill in the spirit that it is intended to evoke in the House, and that is a supportive, cross-partisan approach to nurturing a nascent and highly important innovative economic opportunity for our country.

Encouraging the Growth of the Cryptoasset Sector Act

[Michelle Rempel, Conservative, Calgary Nose Hill, AB]

moved for leave to introduce Bill C-249, An Act respecting the encouragement of the growth of the cryptoasset sector.

Mr. Speaker, right now, Canada should be attracting billions of dollars of investment in the fast-growing cryptoasset industry. Right now, we are seeing government officials discuss and set policy related to cryptoassets. At the same time, many officials and lawmakers are not deeply familiar with what cryptoassets are, how they function or their big potential for economic growth.

To be a world leader, Canada needs to ensure cryptoasset experts and investors are telling us what policy they need or what policy they do not need. The bill would require the Minister of Finance to formally ensure their voices help lead policy development. It would also require the minister to develop a framework using their expertise that would ensure Canada attracts investments and talent related to cryptoassets while protecting those who work with them.

The bill would create a mechanism to formally engage the expertise of cryptoasset innovators and investors in policy development and create a framework for growth.

This effort is the first of its kind in Canada and I am pleased to introduce it today. I thank everybody who has been involved in it, including the drafters, and I look forward to working across party lines in this innovative area of policy to make this effort happen.

(Motions deemed adopted, bill read the first time and printed)