Finance Committee on March 14th, 2022

[Brian Mosoff]

I would say that it covered both pockets. The platforms that are regulated or are becoming regulated in Canada, and that are working with regulators on appropriate frameworks will monitor the activity. If an individual was using a self-hosted wallet and making a donation to an identified address that was not able to be frozen at that time, those platforms now have a red flag up, looking for interaction with those specific assets. They are still able to monitor that behaviour and those activities, and move them to funds should those addresses ever interact directly with their platform.

[Julie Dzerowicz, Liberal, Davenport, ON]

Thank you so much.

[The Chair, Liberal, Peter Fonseca]

Thank you, MP Dzerowicz.

Members, that is the end of our second round. This is a marathon session; we're here for three hours.

I'm going to suspend now for five minutes for a health break and to allow our witnesses to get a little bit of air and a bio break.

Thank you.

[The Chair, Liberal, Peter Fonseca]

I call this meeting back to order.

Welcome back, everybody. We are moving into our third round. First up are the Conservatives and MP Fast for five minutes.

[Ed Fast, Conservative, Abbotsford, BC]

Thank you very much, Mr. Chair.

Welcome to all of our witnesses today.

I will go directly to you, Mr. Walper. I took note that in your opening comments, you deliberately emphasized the issue of property rights as being critical for democracy. You also referenced due process as being absolutely critical. I'm trying to read something between the lines there, but I'm going to ask you to drill down into that.

Are you suggesting that before the Emergencies Act is triggered, due consideration has to be given to these key anchors of our democracy—due process and property rights—and to how those may be affected by the triggering of such an extraordinary piece of legislation? Do you want to drill down into that a little bit? I'd welcome that.

[Dustin Walper]

I can speak to the impact of measures that might affect someone's ability to actually interact with the financial system. For me and my company, it's a very personal thing. Back in 2019 we were de-risked from a Big Six bank. They basically said we hadn't done anything wrong; they just didn't like our industry, even though it's legal. We were kicked off that bank's system with a couple of months' notice. Frankly, it almost put us under. We had to scramble to find another bank that would accept us at a time when cryptocurrency wasn't nearly as mature and regulated as it is today. Frankly, even today it's very difficult.

I really just wanted to make it clear that the impacts of those sorts of measures on businesses and on individuals are quite severe. It's very difficult to operate in society in 2022 without access to the financial system. I think that's something we need to be very careful about putting some guardrails around.

[Ed Fast, Conservative, Abbotsford, BC]

Did you or anyone in your company or your legal counsel ever analyze the threshold that the government applied in triggering the EA?

[Dustin Walper]

That's nothing something I am really familiar with.

[Ed Fast, Conservative, Abbotsford, BC]

Okay.

Are you concerned that the reputation of Canada's cryptocurrency environment, which is presently among the world leaders, I think you would agree, has been in any way tarnished by the triggering or invocation of the Emergencies Act?

[Dustin Walper]

I think any time companies like ours are, for example, seeking investment and going to markets beyond Canada, which is very common for tech companies like ours, the reputation of the country as a stable jurisdiction in which to invest, where property will be protected and there's due process, etc., is a really crucial consideration.

For example, there was coverage in the types of publications our investors would read—the Wall Street Journal, The Economist, the British publication FT, and so forth—and I know that there were anecdotally conversations about it. I can't really speak to the broader impact, but I know that it definitely was a subject of conversation.

[Ed Fast, Conservative, Abbotsford, BC]

Have you formed an opinion on whether the Emergencies Act should have been triggered or whether these police authorities and additional financial measures could have been undertaken without the act being triggered?

[Dustin Walper]

I'm not sure I would be able to say, but I will say that, in general, we've seen a lot of tools that exist for following the process through. I'm not really sure. I'm not really qualified to say. But I think there are a lot of existing processes and mechanisms that can be used for those types of circumstances.

[Ed Fast, Conservative, Abbotsford, BC]

You referred to self-hosted wallets, which might fall outside the purview or the ability of police and bank authorities, financial authorities, to actually freeze and seize. Are you aware of whether there has been an increase in the number of your clients who are choosing that option rather than accounts facilitated by your firm post the exercise of the Emergencies Act?

[Dustin Walper]

I couldn't say for sure whether there's been a change in behaviour. We haven't really extensively studied that.

I should clarify or maybe emphasize the fact that even if someone has Bitcoin in a self-hosted wallet, you can still, through the regular court process, seize that wallet. It can be traced to a person, typically, depending on how they've done it. There are lots of cases where funds held in a wallet, just like a suitcase full of cash, can be seized with the appropriate process.

[Ed Fast, Conservative, Abbotsford, BC]

That's always under due process. Is that correct?

[Dustin Walper]

That's correct.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP Fast.

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

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you, Chair.

Thank you, guests, for being here today. It's very interesting and I'm very interested in the cryptocurrency platforms and the processes you want to deal with or are dealing with.

I want to follow up on Mr. Fast's comments. The donations, the $1.1million, came in through Bitcoin, and then all of a sudden we had a lawsuit by the citizens of Ottawa, and a judge froze that amount, $1.1 million or $1.3 million. I can't quite remember what it was.

I guess what I'm asking is, how does that affect the regulatory process that we're debating with respect to how far the outreach should be from the procedures that are in place now? Or is that something different altogether?

I'll throw it out to anybody who wants to answer it.

[Blair Wiley]

I'll take the first crack at it. I think it's a good question.

One thing I would say is that with respect to cryptocurrency businesses based in Canada, like Newton, Wealthsimple and Ether Capital, a court order or a legal development can be put in place directly, to which actors based here must be responsive.

I think part of the nature of cryptocurrency is that it's everywhere and nowhere at the same time. It's like the Internet in how global it is, so I think it behooves all of us to really invest in having a regulated community of cryptocurrency companies based here in Canada that are going to be responsive and are going to be engaged in processes like this and respond when orders take effect.

When clients, Canadian consumers, decide to buy Bitcoin and hold it on some foreign platform based in an offshore jurisdiction, just as when wealthy Canadians choose to put their assets into offshore bank accounts, it just becomes that much more difficult for the arm of the Canadian court system to apply.

[Heath MacDonald, Liberal, Malpeque, PE]

Thank you.

How many crypto companies are there currently in Canada? Someone mentioned an association. You said the RCMP contacted the association relevant to this issue. I know there was a little bit of concern about how they perhaps should have contacted each company, so I'm curious to know how many companies are in Canada and how many are under the association that was mentioned previously.

[Blair Wiley]

I think the FINTRAC record is to be reviewed, but I think there are hundreds of companies that are licensed and registered for virtual currency money services in Canada. There's a huge range with everything from those ATMs you might see in a corner store to digital platforms like Newton or Wealthsimple, to companies based entirely outside of Canada that have taken a step at licensing in Canada.

There's no real association that speaks for the entire cryptocurrency industry that would also represent all members of the community. Things work much more haphazardly through the 10 largest or so platforms, into which both Newton and Wealthsimple would fall.

[Heath MacDonald, Liberal, Malpeque, PE]

Interesting.

Who is developing the policies or regulations now? You guys talked about different policies, although someone mentioned different interpretations. I guess I'm interested, as a policy-maker or being a part of a policy-making, in what framework you're working within or what group you are working within. Are we at a point where we need to say that we need to sit down with people like you and with the government and say that we need to develop a framework?

Where are we at?

To me, there are an awful lot of grey areas here. Maybe I just don't understand it. I know it's been around for a number of years, but it just seems to be on the precipice of something bigger, and this has obviously shed a light on it.

I'm kind of wondering how much responsibility of the grey area is yours, and how much responsibility of the grey area is government's?

[Dustin Walper]

Blair can speak to some of the more legal aspects but, in general, the industry needs to do better at forming associations to advocate for certain policy.

I also think there could be new federal legislation. A lot of the existing regulation that's happening right now under the various securities commissions provincially is based on shoehorning existing securities law. In some areas, it works well. In other areas, it doesn't work quite as well. It also doesn't really consider the fact that we should be thinking more broadly about international competitiveness in terms of jurisdictions like Switzerland that have really strong legal frameworks and banking frameworks in place. You can see what that's doing for their economy.

There are a bunch of things about which we would love to be involved in a conversation.

[The Chair, Liberal, Peter Fonseca]

Thank you.

Thank you, MP MacDonald. That's the end of your time.

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

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

Thank you, Mr. Chair.

My question is for Ms. Archibald, the national chief of the Assembly of First Nations.

Ms. Archibald, I want to thank you for your presentation and for your answers to the various questions so far.

I want to make sure that I understood your point in order to determine whether, from your perspective and the perspective of the Assembly of First Nations, the Emergencies Act was necessary to break up the siege taking place in Ottawa. I gather that the use of this act sets a precedent. The government could use it more often when demonstrations occur anywhere in the country. If this act, the legislative atomic bomb, is used too often, it will have ramifications and it may unfairly affect first nations members, Inuit and Métis people because of systemic racism.

Is that right?