Evidence of meeting #45 for Industry, Science and Technology in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was ethereum.
A video is available from Parliament.
12:30 p.m.
Head of Legal, Wealthsimple Crypto, Wealthsimple
Or perhaps they are not regulated at all.
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Head of Legal, Wealthsimple Crypto, Wealthsimple
The Ontario Securities Commission recently did a survey that's quite instructive in this regard. It did more than capture the number of Canadians who own crypto assets. I believe I mentioned in my opening statement that it's about 3.75 million, or 12% of Canadians. The survey then goes on to break down the crypto trading platforms that are used by Canadians. Of the people who hold crypto assets, it has what percentage of them use which platform and lists them by name. I noted in my opening statement that three out of the four crypto trading platforms most used by Canadians are actually foreign-owned.
We could certainly provide the committee with a copy of that survey. It's published by the Ontario Securities Commission and provides more detail. That would give a sense of how many Canadians are using foreign platforms and holding their crypto assets abroad.
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Liberal
Peter Fragiskatos Liberal London North Centre, ON
I'm not a member of the committee, Mr. Chair, but maybe the committee would benefit from that information.
As I say, it's a question on risk exposure if Canadians hold crypto assets in environments that are either regulated to a small extent or not regulated at all. It's an important question that merits consideration.
Thank you.
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Liberal
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you, Mr. Chair, and thank you to all the witnesses here today.
I think this has been the most exciting meeting we've participated in since I joined this committee. That's a huge compliment to you and the industry you're working in. In some of the language used today, it's like the seismic shift that my children and many of the children of MPs around this table will invariably experience in their lifetime.
I have a quick question for Mr. Mosoff and Mr. Thomas to start off, just so I'm aware.
In some of the testimony today we heard about cold storage. If I'm a young person under the age of 40 who has a couple of thousand dollars in bitcoin or a coin issued through Ethereum, where is the cold storage today? Where is it physically located?
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Chief Executive Officer, President of Canadian Web3 Council, Ether Capital
I'll let Mr. Thomas chime in, but as I mentioned, I don't believe that the young people today are likely buying structured products like Bitcoin or Ethereum ETFs.
Those assets are being held in custody—or cold storage—largely with Gemini or Coinbase. These are two highly regulated, highly respected U.S. entities. Gemini, for example, holds a BitLicense in New York. It's a trust company. It's the gold standard of custody.
I don't think that most people—I don't want to say under-40s—who want to engage in a self-hosted wallet are the people who are buying the assets through that avenue. I would assume that those individuals are perhaps holding their assets on a crypto trading platform. It's up to that individual crypto trading platform as to how they are doing the custody.
It could be very well that they're using Gemini or Coinbase on the back end. They are perhaps using a software-based wallet called Fireblocks for some of the custody. The individuals may be withdrawing that asset to a wallet that they are in control of. It can be software-based or hardware-based—the hardware being a little USB key that they plug into their computer.
I also would point out that it's not risk-free. A lot of people say that it is a solution; it just comes with a different set of responsibilities. That end user would have to secure that wallet and have an appropriate backup to ensure they don't lose their funds.
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Okay, thank you.
I have some other stuff just in summary of what we've heard today. Anyone can chime in on this.
This is the first study done by Parliament, I believe, on blockchain. Is that correct, Mr. Chair?
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Liberal
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Generally it's one of the first in which we're actually looking at this. I'm still trying to wrap my head around it. Today's testimony was instrumental in having a better understanding.
What I heard was that we need a national strategy for retail investment. We need asset custody regulation and we need better policies for insurance.
As a committee, when we're drafting a report to Parliament and the Minister of Industry, what other key points that haven't been mentioned today need to be covered in any type of national framework as we begin looking it, so we can get it right to protect Canadians as they embark on this new reality, as it was referred to in some cases today?
12:35 p.m.
Chief Executive Officer, President of Canadian Web3 Council, Ether Capital
I would just add in one very small thing. Understanding that while we protect Canadians and while we set off on that journey—of course in good spirit—it may mean blocking those same Canadians from participating in the cutting-edge technology and opportunities or assets.
They're at two different ends of the spectrum. Striking the balance, to me, is the key. It's not just leaning completely towards protection. Protection might just mean blocking them from essentially every asset and every activity that's at the cutting edge of this industry. It may be saying they can buy some bitcoin and they can buy some ether, but nothing else.
That will lead to no businesses, no jobs and perhaps missing out on future assets that are valuable, while protecting them from—
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you, Mr. Mosoff. I have such limited time.
Does anyone else want to chime in on that point?
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Head of Legal, Wealthsimple Crypto, Wealthsimple
Very briefly, I would suggest adding taxation to your list.
There are various issues relating to taxation of transactions of crypto assets that could bear some clarification to assist Canadians. It's also to ensure, to the extent Canadians are using foreign platforms, that the revenues and profits that those platforms are generating from Canadians' activities are being appropriately taxed and received by Canada.
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Conservative
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General Counsel and Chief Legal Officer, WonderFi Technologies Inc.
Related to that is enforcement on unregulated offshore platforms. Taxation is certainly one way, but other sanctions would be helpful as well to ensure that Canadians are using Canadian platforms.
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Chief Executive Officer, Chainsafe Systems Inc.
I would just add further to Mr. Mosoff's point.
There is a spectrum where the most innovative, future-looking technologies are unstoppable and are centralized versions of some of the centralized services you're talking about regulating right now. We need to ensure we empower Canadians to be leaders and not followers. That means enabling them to engage in Web3 beyond just access, as we're talking about regulating today.
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you.
I have one very broad-based, blue-sky question. Maybe Mr. Mosoff is actually best to answer this.
What I'm hearing today are tones of revolutionary language for the way we live our lives and the way we interact online. I think everyone would agree with that consensus.
In the geopolitical world we're living in right now, a lot of people have Iran and China on their minds. Because this technology is so new and nascent, in China, say, with the state controls it has on Internet usage now, are Chinese citizens able to participate in the blockchain economy in a free way, in the way that Canadians can right now? Has the state already intervened to stop that from taking place?
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Chief Executive Officer, President of Canadian Web3 Council, Ether Capital
I believe that in China, many citizens are able to run VPNs and likely participate on-chain in various activities. What China or any other state or country can do is regulate the on-ramps and the off-ramps and essentially block their citizens from being able to exit or enter that economy with their local currency.
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Does anyone else want to comment on the application of these technologies in totalitarian states?
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Chief Executive Officer, Chainsafe Systems Inc.
What we're seeing from these states is absolutely a stance against blockchain technology and everything it stands for. They do not believe in freedom. They do not believe in liberty. Quite frankly, they see this technology as stifling the ability for them to have that totalitarian control.
On our list of things to share with the committee, we will definitely make sure to share how these totalitarian regimes are regulating blockchain technology and stopping progress, in turn causing a brain drain, which we have to avoid here in Canada.
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Conservative
Brad Vis Conservative Mission—Matsqui—Fraser Canyon, BC
Thank you all for your time today. This was really very beneficial.
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Liberal
The Chair Liberal Joël Lightbound
Thank you, Mr. Vis.
Now I need unanimous consent for this committee to keep going until 1 p.m. because the bells are ringing.
Do I have unanimous consent?
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Some. hon. members
Agreed.
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Liberal