Finance Committee on March 14th, 2022

[National Chief RoseAnne Archibald]

Thank you for your question.

I don't speak French.

I want to say yes. That's particularly our concern. We understand that extremist groups were involved in the situation in Ottawa. I felt it was very important to come to this committee to explain that first nations are neither extremist groups, nor are we terrorists. When we get involved in civil actions, it is always about protecting those rights.

I am concerned about the long-term implications of this, and I expressed that concern immediately to Minister Miller when he called me. I have felt compelled to explain this to the committee and to be on record about that, so that when we move forward into situations where first nations are involved in civil actions, the Emergencies Act is not immediately sought. There will be processes that we, hopefully, negotiate and walk together on, rather than having our people, as I said, being subject to undue surveillance, pressures and financial implications because of the invocation of this act.

Merci for your question.

[Gabriel Ste-Marie, Bloc, Joliette, QC]

Meegwetch.

[The Chair, Liberal, Peter Fonseca]

Thank you, National Chief Archibald.

Thank you, MP Ste-Marie.

Now we're moving to the NDP and MP Blaikie for two and a half minutes.

[Daniel Blaikie, NDP, Elmwood—Transcona, MB]

I would like to offer up an opportunity to folks from the cryptocurrency industry to talk somewhat along the lines of what I asked National Chief Archibald earlier.

This committee is charged with looking at how the government used the powers under the Emergencies Act, particularly those financial powers. We're in a position to make recommendations to the government, either on changes to the act or other kinds of policy and direction that it might have provided alongside the declaration of the emergency.

Are there any particular recommendations that you have, either for this committee or that you think this committee should be making to government?

I will start with Mr. Mosoff and move down the line.

[Brian Mosoff]

This question will be better answered by the other two members in the crypto community, but the risk here is that the community gets further tainted and has a more difficult time getting access to appropriate banking and having audit firms help them come into compliance and oversee their businesses. It's really hard to measure what those long-term implications can be from a very small series of events.

I will turn it over to both Blair and Dustin for further comment.

[Blair Wiley]

I would reiterate that we see millions of Canadians owning cryptocurrency now, mostly because they're interested in this technology, the asset class and the promise that it holds. We see great companies being built that have cryptocurrency as part of their core corporate strategy.

For the Department of Finance and for all of the federal government, there is an opportunity to be responsive and to engage. That way, when we talk about financial measures and emergency measures, we don't just gravitate to the big five banks and talk to them and perhaps not give proper attention to the millions and billions of dollars of assets, investments and client interest in the cryptocurrency space, as well as other wealth management spaces in the fintech community more broadly.

We can certainly increase engagements. We could make better policy and have better communication in these moments of emergency that, hopefully, are rare and few and far between.

[Dustin Walper]

I think that hits the nail on the head. What we would love to see, as an industry, is a broader set of federal policies and perhaps some legislation that really makes Canada the place for companies that want to invest in this space, who want to do it legally and safely, and with concern even for the safety of investors that this is the best country to do it in.

We would love to participate in any conversation about that.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Blaikie. That's the time.

We are moving to the Conservatives. I have MP Lawrence for five minutes.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much.

I want to talk briefly about Bluesky with Mr. Mosoff, Mr. Wiley and Mr. Walper.

If we did everything right, what could be the potential, in general terms, of the crypto industry for Canada? Are we talking about thousands of jobs or tens of thousands of jobs, millions of dollars or billions of dollars for the Canadian economy?

[Brian Mosoff]

I see that this as going to be a 10-plus-trillion dollar industry within the next decade. Stateside, we're seeing national efforts to turn to existing agencies, asking for recommendations on and study of certain areas, whether it's trading platforms, how stable coins are—tokenized versions of a dollar that exist on these blockchains—and what appropriate frameworks are. We can do the same thing here, and we should do the same thing here. There's the opportunity, again, to lean into this to figure out how we legitimize it and make sure that it's being used in an appropriate way.

There are thousands or tens of thousands of jobs for developers for platforms, whether they're.... Today, we're talking largely about exchanges, but there are going to be structured products and new verticals that emerge.

We've seen a proliferation of stable coin activity in NFTs, which is digital art that's living on a blockchain. We're seeing decentralized finance and the opportunity to build lending and trading. Different types of finance exist natively on a blockchain.

As someone who goes to these various events, I see all that developer activity, and I would love to see it here, but we need, as everyone else has mentioned, a national framework and initiative to consult with industry to figure out how we make that appropriate.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Perfect. You captured it well. I wanted to catch up on that.

I will get back to you, Mr. Walper, I promise, but that captured it well.

Any one of the three witnesses can feel free to respond to this.

What I'm hearing loud and clear is that you're not averse to regulation. What you don't want—maybe I'm putting words in your mouth, and feel free to correct me—is an ad hoc knee-jerk regulation, a little bit like what we saw with the invocation of the emergency measures act.

If we don't respect property rights in this country, to what extent could it potentially undermine our ability to compete in a crypto space?

[Brian Mosoff]

My very short answer will be that we have a fragmented regulatory system. It's hard for platforms to be competitive with those in other jurisdictions.

Canadians want access to all of this really exciting activity and we need to find a way to allow them to use the Canadian platforms as access points in appropriate ways. We need some way of harmonizing everyone's efforts to have that activity here.

[Dustin Walper]

If I may, I'll quickly give a brief, concrete example of that.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Yes.

[Dustin Walper]

In Canada, currently, all of our platforms, like ours and like Wealthsimple's, are becoming regulated. Much of that regulation falls under existing securities law, so it puts a lot of the applications in the Web3 decentralized finance world. That's somewhat out of our reach, because a lot of them would be classified as securities; therefore, there's a long and onerous approval process in order to offer them to Canadians. What happens is that Canadians then use offshore platforms that are not nearly as regulated as ours are to access those services and those tools.

We'd love to be able to offer that and invest in that right here at home.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you.

[Blair Wiley]

The only thing I would add is that the developer community for cryptocurrency applications is strong, is growing and is also very mobile. They will move to jurisdictions where they see friendly environments for developing new technology, new applications and new systems.

We have a perfect example in the founders of the Ethereum blockchain network, which was really the pioneer in enabling much more sophisticated financial transactions on a blockchain, besides simple Bitcoin transactions. Those homegrown founders started out in Canada at the University of Waterloo and moved to Switzerland because there was a regime there that enabled the establishment of a foundation that would really govern the development of the Ethereum blockchain.

While we still have developers here, they do look at those examples and ask, “Would I be better off in Singapore, in Switzerland, in other parts of Europe, or even in the United States, because there's more of a supportive environment for me to develop innovative new applications that don't fit neatly into any one regulatory framework?” That's the opportunity, and also the threat, in front of us.

[Philip Lawrence, Conservative, Northumberland—Peterborough South, ON]

Thank you very much for that.

Thank you very much for the testimony and for what you're doing for the Canadian economy.

I'm going to change gears now and go to National Chief Archibald for a second, just quickly, because I see the chair unmuting, and that's never good for me.

In the definition of “designated person”, it says “indirectly” or “directly”. If in fact we have this trigger—the emergency measure trigger—and it's triggered with respect to a first nations protest or otherwise, does it give you concern that literally anyone who supported a blockade that might be for a rightful and good cause could have their bank accounts frozen, National Chief?

[The Chair, Liberal, Peter Fonseca]

Could we have a very short answer, please, National Chief Archibald?

[National Chief RoseAnne Archibald]

Yes. I'm concerned for anyone who could wrongfully have their bank accounts frozen for civil actions that involve treaty and aboriginal and inherent rights—yes.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Lawrence.

We're moving to the Liberals. We have MP Baker up for five minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Chair.

I'd like to continue with this really interesting discussion about cryptocurrency and its potential. I'll direct my question to Mr. Mosoff, but if others want to chime in, I'd be eager to hear your thoughts.

My background is in business. I was a management consultant. I helped businesses grow and develop and create jobs in Canada. Certainly, I'm one who believes that we need to seek opportunities to grow economic opportunity in Canada and to make sure the benefits of that are shared widely.

Here's one of the questions I have for you, Mr. Mosoff. Do cryptocurrency and e-wallets—some of the concepts you've been talking about—allow us also to prevent illegal activity to the same degree that our current system does? Obviously, I want to grow this economic opportunity for people, but I also want to make sure that we're doing it safely and responsibly and that it's not facilitating harm. Could you speak to that a bit?

[Brian Mosoff]

Thanks for the question.

This is where things get very nuanced. It is much harder to use a self-hosted wallet as a choke point. Due process would need to take place. You don't have a centralized entity that can shut off that wallet or activity, but the opportunity here is to use new tools and train new personnel to use the analytics software available. There are leading companies out there, like Elliptic and Chainalysis, and these are the ones that are worth becoming familiar with as the space evolves, again, to monitor that activity to ensure it's being used in an appropriate way.

When a user does have a self-hosted wallet—software-based, hardware-based, a little USB key at home—they are able to interact with the wider ecosystem that may not reside in our jurisdiction. It may not have identified individuals. There's a different risk. I do think education is very important in this space for Canadians who may not be familiar with the risks of a self-hosted wallet and what some of those contracts or applications they're interacting with may carry.

Again, I think it's important here. The opportunity is to create different access points for different individuals. Some individuals are more comfortable on a centralized exchange, and that's where activities can be vetted for appropriateness and how they would be offered. Then there are users who want to experiment with the technology and take on more risks, and those wallets will have to be monitored by different tools to ensure they're being used in appropriate ways.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Okay.

[Blair Wiley]

I would just add that I think it's important to always come back to the point that the technology itself is neutral. It's technology that can be used for good or for bad. There are many, many examples of it being used for good. Unfortunately, there are some examples of it being used for bad. The important thing to emphasize, though, is that it is a very transparent, open public ledger of all transactions. It's very difficult for folks to hide illicit activity for very long. The auditability and transparency of the blockchain is actually a very powerful tool to deter financial crime.

I think the thing that all companies who are in this space are trying to do is figure out how we really amplify the good applications of this technology and continue to develop better tools so that it's not used for improper purposes.