Finance Committee on March 14th, 2022

[Ed Fast, Conservative, Abbotsford, BC]

That would be very helpful.

Those are my questions.

[The Chair, Liberal, Peter Fonseca]

Thank you, National Chief Archibald.

Thank you, MP Fast.

We're moving to the Liberals and MP MacDonald for four minutes.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Mr. Chair.

I have a quick question for our crypto friends. Can you elaborate on the concern that our proceeds of crime legislation possibly doesn't apply to offshore crypto platforms used by Canadians? Can you expand on what the parameters around that are, or what we should be trying to do to eliminate some of those possibly illegitimate transactions, or offences?

[Blair Wiley]

Dustin, do you want to take that or do you want me to take that?

[Dustin Walper]

You can take the first pass at it.

[Blair Wiley]

I'll give it a shot.

Like in any industry, there are good players and sometimes not so good players. The challenge that we see in cryptocurrency is that, perhaps because many jurisdictions around the world have approached this space with caution, you see some Internet-enabled crypto companies moving to offshore jurisdictions, where they're received with welcoming arms.

It becomes more challenging for law enforcement in Canada, our court system and the orders that our courts can issue to be enforced; yet the Seychelles or other sorts of—I don't mean to pick on the Seychelles.... I would just say that there are many offshore jurisdictions where these platforms are based.

We think that the right way to do it is to ensure that only regulated platforms are allowed to operate here, that only they can advertise here, that only they can be available in the app stores for download by Canadians and/or have their websites blocked. There's a whole range of means of ensuring that only regulated players can operate here.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you very much.

I'm going to go to Mr. Tremblay very quickly. We know what happened to the society in Ottawa and the mental health aspect of it. We talk a lot about the economic support, but we've heard an awful lot about mental health during the occupation in Ottawa. I wonder about your organization and what's taking place relevant to those people in downtown Ottawa who had many issues relevant to mental health.

Is it ongoing or has it teetered off to some extent? There were spikes during the three-week occupation.

[Michael Tremblay]

It's hard for me to really get a good assessment. It's a great question.

What I can say is that we work really closely with all of our community partners, like the BIA teams and the Board of Trade, to stay as close to these companies as we can. We do a lot of training, so we get to see them very regularly. I don't know that it's far enough away from both the pandemic and the convoy situation to say that there's been a drop in mental health issues.

I think people are really struggling. There may be a glimmer of hope on the horizon here, but the financial duress is a big driver for a lot of these people, and they're not free and clear of that. Many of them are still on the brink.

I don't know how else to answer the question. It is a very important question, though.

Thank you.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

Is my time up, Mr. Chair?

[The Chair, Liberal, Peter Fonseca]

Thank you, MP MacDonald. Yes, it is.

We're moving to the Bloc and MP Ste-Marie for two minutes, please.

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

Thank you, Mr. Chair.

I'll use my turn to make a few comments.

I have some significant concerns about crypto currencies. First, I think that it would be more accurate to call them “crypto assets” instead of using the term “crypto currencies.” This doesn't cover all the uses of the currency, including its use as a medium of exchange.

I also have serious concerns about the potential for these currencies to ultimately be recognized as legal tender. If they compete with government money, this would limit the central bank's ability to stabilize the economy in a crisis. In my view, this would take us back to the crises experienced a century ago, and we wouldn't be able to use the tools acquired since then.

From my perspective, these currencies are assets now, and purely speculative assets. Crypto assets don't have any intrinsic value. By producing and using them, we don't generate more goods or services in the economy. Moreover, like any speculative asset, their value is bound to fluctuate wildly. I sincerely hope that a possible drop in their value doesn't negatively affect the real economy.

I'm also sorry to see all the energy wasted during the mining of crypto assets. I understand that the basic idea is to compensate for the seigniorage right of crypto assets with a cost, even though that cost doesn't give them an intrinsic value.

Lastly, I'm obviously concerned about the use of these tools for illegal activities and in tax havens.

Thank you, Mr. Chair.

[The Chair, Liberal, Peter Fonseca]

Thank you, Mr. Ste‑Marie.

We will move to the NDP and MP Blaikie for two minutes.

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

Thank you.

For the witnesses from the cryptocurrency industry, I think one of the things that people are talking about a lot—and not just with respect to the convoy and not just with respect to Russian oligarchs—is the lack of financial transparency. It's a long-standing thing and something that has been created, in that there are countries that have built their domestic market around providing financial secrecy.

I'm wondering what you think about that in the context of cryptocurrency and the role of secrecy in the cryptocurrency industry, and how it's similar or different, and what we might do as regulators to try to establish a more transparent regime from the get-go, as it were. I know that's a lot to chew on for about a minute, but I'll let whoever is ready to jump in do that.

[Blair Wiley]

It's a good question, Daniel.

Again, I would come back to the point that public blockchains like Bitcoin, by their nature, are public. You can see every transaction that's ever occurred on the Bitcoin blockchain since it was created. That's a degree of transparency that we don't actually have in aspects of our banking system otherwise, where we rely on intermediaries to produce their own ledgers of transactions that occur.

I do want to respectfully call into question this notion that Bitcoin is somehow able to amplify secret transactions that wouldn't otherwise be detected by our legal and regulatory system. I think there is great promise in using the permanent public ledger of Bitcoin transactions to actually amplify and improve law enforcement and stamp out illegitimate activities.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Blaikie.

We're moving to the Conservatives and MP Lawrence for five minutes.

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

Thank you very much.

First of all, thank you to all the witnesses. It's been a long time and I really appreciate it. Meegwetch to everyone.

Mr. Wiley, I want to go back to the initial discussion you had with Mr. Chambers about the information gathered as part of this. Could you possibly speak not just about your organization but also about what you might think about other organizations? On that information that's been given to the RCMP, that list, in accordance with AML law, if I heard you correctly—if I didn't, correct me—not only should you retain it, but you should use it or other organizations could use it to decide future credit decisions or otherwise. If I'm incorrect.... please go ahead.

[Blair Wiley]

No, that's a good question.

I think the way we look at it is that in following the risk-based approach to anti-money laundering, you do need to assign risk ratings to various clients. For example, politically exposed persons are held to a higher risk rating because of their attachment to government. We monitor all of our clients based on risk ratings, and every organization will make their own determination as to how much risk may be attached.

As to whether that actually influences a credit decision, for example, about whether to extend a loan or allow transactions, I can't comment on how a bank might operate. For us, we make decisions ensuring that we're always trying to manage the risks associated with money laundering without impeding legitimate clients and legitimate transactions using our platform.

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

That's terrific. Thank you very much for that.

I'm going to switch gears and go to Mr. Tremblay for a second.

I would suspect that at least some of your members would have clients who are tourists and international.... I'm wondering if you could comment on whether it would have a positive impact on your members if in fact the government were to ease or just eliminate federal restrictions, both interprovincially and internationally.

[Michael Tremblay]

Certainly, on having clarity on how the regulatory framework would actually operate, I think the other panellists have done a very good job of describing the importance of having clear, stable rules for how this would work.

In our work in attracting foreign investment into the region, these are some very clear areas that companies look for when they're looking at setting up camp in a specific region, so yes, I would say that having clarity on how this would work is I think an important effort that should go forward from this discussion. It makes sense. It would help Canada to be a more competitive region for these types of assets.

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

That's perfect.

For you, Mr. Walper, this is somewhat related. It might have been you or Mr. Wiley who talked about Switzerland as being successful. Do you feel that your industry has a strong connection to the government? By that I mean if, in fact, there are regulatory changes that are needed and required, do you feel that your industry has a strong connection so that we can get that done? Do you feel that we can be nimble, as a government, to attract the billions of dollars in foreign capital that may very well be up for grabs in the crypto space?

[Dustin Walper]

That's a good question. In the cryptocurrency, digital asset space at the moment, the answer is probably not. There is a lot of work we could all do together to improve that.

There is a tendency for governments to go to the largest player—the big banks—when they are trying to set policy. They, by their nature, are going to be very conservative in their approach to change—a different kind—and less willing to cede any part of their business that might ultimately harm them in the long term. Engaging with companies like ours and Wealthsimple would be a good move.

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

For a quick clarification, you meant small “c” conservative?

[Dustin Walper]

That's correct.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Lawrence.

We are going to the Liberals and MP Baker.

MP Baker, you will be the final member to ask questions for us to conclude this round and session. You have four minutes.

[Yvan Baker, Liberal, Etobicoke Centre, ON]

Thanks very much, Mr. Chair.

I want to come back to our theme that folks have been talking about, which is cryptocurrency. I want to circle back to what my colleague MP Chatel raised in one of her last interventions, which I thank her for raising. It is Russia's invasion of Ukraine and how we see the global community rallying, uniting and willing to incur costs itself to impose sanctions on Vladimir Putin, the people around him and the Russian economy, etc. One of the things we have seen is a concerted effort by that group of allies, including Canada, to make sure that there are no loopholes in those sanctions.

My question is this. Does cryptocurrency provide greater loopholes than other forms of monetary exchange or financial mechanisms? If so, can we close those loopholes?