Industry Committee on Nov. 24th, 2022

[Patrick Mandic]

Yes. I'm going to give you an example that is very real.

For a steel mill that uses gas, in order to calculate my emissions, I'm using a global factor for how much in CO2 emissions I'm incurring by burning this gas. Now, if you're in Canada, you might be using gas that's incurring a lot less CO2 because it's greener gas—it's a greener well.

Now, if I know it, if I can track where that gas is coming from, then I can go and say, “Well, actually, my company wasn't as bad to the environment as I thought it was.” Now I have the door open to maybe sell this product at a premium to organizations that are environmentally conscious.

The value chain starts very, very early.

[Han Dong, Liberal, Don Valley North, ON]

Yes, but my question remains. To change the status quo, to change their normal practice right now...the Canadian energy sector is one of the cleanest in the world, but to create an incentive for them to do better—because we have an emissions target to hit—do you think blockchain is a good tool? Do you think it would be especially useful in the system we have today, where there's a price on carbon?

[Patrick Mandic]

Absolutely. You need to measure, so that's the only way of doing it.

[Han Dong, Liberal, Don Valley North, ON]

Yes. It makes a lot of sense.

Thank you, Chair.

[The Chair, Liberal, Joël Lightbound]

Mr. Dong, you're way over time. You conveniently forgot to look at me when you started with your line of questions, but it was interesting.

Before I turn it over to Mr. Trudel, I'll just play devil's advocate with your question regarding Bitcoin risks and remind you that a month ago the Financial Times reported that long-term, inflation-linked gilts in the U.K. had lost more value than Bitcoin on a yearly basis, which they couldn't even believe they were writing. Sometimes risk is where we don't expect it to be.

Monsieur Trudel, I'll turn it over to you.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Mr. Chair.

The exchange has been very interesting. We understand that it seems pretty unanimous that this remains a high-risk industry. I've been hearing comments since the second meeting. I'm not sure how I feel about it, but I see some positives.

Mr. Amiouny, I'll start with you because I'll be really pleased to hear you speak French.

How can the public be better informed? What message could be sent today to explain the positive aspects of this industry? How can we trust this industry? After all, there's a lot of fear. There has been fraud. The bankruptcy of FTX didn't help. There's a lot of misinformation in the media.

How can you sell your industry? What message would you like to send? I hear what you’re saying. You're saying that this is the Google of tomorrow, that it's inevitable and that this is where we're headed. What are the strengths of this industry? What can we hold onto to have confidence in this industry, to be convinced that this is important, and that it's the future?

[Jean Amiouny]

Thank you for your question.

Canadian platforms do a lot to reassure Canadians. Services like Shakepay and the platforms of the other witnesses are very different from platforms outside of Canada. We talked about that a little earlier.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

What is different or better in Canada?

[Jean Amiouny]

In Canada, client funds must be held on a one-to-one ratio. That means that for every dollar a consumer has on our platform, we must have exactly one dollar in their account. For every bitcoin, there must be one bitcoin set aside for users.

The situations you see outside of Canada, such as that of FTX—

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Couldn't that happen here?

[Jean Amiouny]

The measures that platforms are subject to here in Canada mean that the risks are much lower.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

What could you tell me to convince me that this is something important and that I should invest in it? What major gain could I get from this investment?

[Jean Amiouny]

I don't give financial advice, but bitcoin technology isn't just about money or investment. Bitcoin is a public good. It allows anyone to use a phone to transfer money anywhere in the world.

Before the Internet, you had to send a message by mail, and it took weeks to cross the ocean. The Internet has made virtual communication possible—

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

There were also telegrams.

[Jean Amiouny]

That's right.

With email and social media, the Internet has made it possible for us to communicate instantly with anyone in the world, no matter what city or country they're in.

So bitcoin is a public good that allows anyone to always have access on their phone to a platform that allows them to transfer money to another person without intermediary fees or complications. The transfer is done directly, like an email.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Okay.

Mr. Mandic, I have the same question for you. How would you promote your industry to Canadians right now? What is the biggest difference from the current banking system?

[Patrick Mandic]

I think the most important thing to recognize here is that we're very focused on the word “blockchain” technology, and we should be focused on the use cases, the implications and the impacts, and what we have to gain.

In our case, with Neoflow, indeed with the oil and gas industry, just by implementing this for customs we're saving the industry north of $100 million just in tariffs, because it's so hard to prove origination due simply to the amount of paperwork. That's not including back office work. If you think about digitalizing everything, it's billions of dollars.

If, instead of using paper, communication between organizations were digital, we would be saving millions of dollars. We would have supply chains that adapt automatically. We would have the ability to know for certain that a product is Canadian and is not being dumped from other countries, so it's very powerful.

In order to do that, we need to get to a critical mass of adoption. That's what we should be focusing on.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Trudel.

Unfortunately, you used twice your allotted time, but you may get another chance.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you.

[The Chair, Liberal, Joël Lightbound]

Mr. Cannings.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm going to continue with Mr. Mandic, because I'm interested in this whole supply chain aspect, but I'm also still concerned about the energy costs of blockchain, at least from what I heard from cyptocurrency.

Again, it's my understanding that when you're mining Bitcoin, every new Bitcoin that is produced costs more energy and takes more computational time.

Is this the same for the verifiable credentials you're talking about? Did they have an energy cost associated with them as well?

[Patrick Mandic]

No. Everything in life has an energy cost. Building this table has an energy cost. It's all about thinking about whether or not this cost is worth what I'm doing.

In terms of verifiable credentials, the cost is many orders of magnitude lower than it would be with Bitcoin, for example, because most of the work is not happening in the blockchain itself.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

I'm glad to hear that. You've described a system that sounds like it would be very beneficial for industry, commerce and trade. You talk about reaching that critical mass.

The question in my mind, because I know nothing about it, is this. It would save money, but what would the energy costs be if we reached that critical mass and our whole economy was running on this? Would it be a very minor addition?

[Patrick Mandic]

It would be lower than it is today.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Okay, well, that makes me feel good.