Industry Committee on Nov. 24th, 2022

[Patrick Mandic]

It's a business case, so you're going to have some increments in energy utilization and you're going to have some savings. We're going to be better off with completely digital technology than we are today.

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

I feel a lot better about that.

Now I just need to try to understand how this tracking of the whole value chain happens. I think Ms. Karringten mentioned pharmacies and drugs, and you're talking about clean steel, green steel or greener steel.

How would someone in a retail store be able to look at a bottle of cold medicine or something that had to be recalled and know, through blockchain technology, quickly and truthfully where it came from and the path it went through? Would you try to explain to me how that works?

[Patrick Mandic]

Very simply put, the key is to have a universal identifier for a product, which is what we don't have today. Each company has its database, and it has an identifier for each of the products in its database, but you don't have a universal identifier for an individual product—not product type but an individual product. Once you have that, you've solved the problem.

In order to have that, what you need to do is to be able to have the digital history of the product and the composition of the product, and that's built with what I mentioned before, the digital assertions that you containerize into what are called verifiable credentials. They use other standards from DS-1, and now this has also been synchronized in other standardization bodies like IETF. Essentially, it's just that.

Depending on the type of product, you might want to have organizations report on these products, or you want to also have inspectors verify, certify and sign off on those products.

There are many layers, but the higher level is just universal identifiers and having a digital history of that product that is interoperable and that anyone can read, independently of the technology they use.

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

Okay, thank you.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Mr. Généreux, you have the floor.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Thank you, Mr. Chair. I'd also like to thank the witnesses.

Since the meeting is public, I also want to say, without being partisan, that I know a party leader who said in the House of Commons—and even outside the House—that interest rates were going to stay so low for so long that we could borrow as much money as we wanted. Yet the Bank of Canada policy rate has gone from 0.5% to about 4%, the debt has doubled, and interest rates have doubled too.

That said, I'm very interested in what we're learning today.

Ms. Karringten, is your association able to provide the committee and all parliamentarians who will be studying these issues with the most essential elements that should be put in place in any future regulations or legislation regarding blockchain in Canada?

[Koleya Karringten]

I'm sorry. I may need slightly more clarification on that. Is it in terms of legislation around how blockchain supports...? Are we talking about inflation? Are we asking for that in the cryptocurrency space, or talking about the—

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

It has nothing to do with inflation.

I'm talking about blockchain and what can happen with Bitcoin or whatever cryptocurrency, as well, and all the other applications. That's what we're actually doing here. We're trying to see what the government can put in place to secure everything that will eventually be done or used with blockchain.

[Koleya Karringten]

A good step would have possibly been Bill C-249, if that's what it was called. It's just being able to start opening up the dialogue around this industry, and these conversations and topics—to have better education, directly from our industry to government, so we can be part of supporting any legislation or bills coming into place for the industry.

It's important to note that this industry is not only non-partisan but also one of extreme innovation. We're innovating in the financial service, supply chain, agriculture and energy spaces. It's difficult for me to specifically state any legislation that would be able to go...in terms of supporting it, because.... Being on the enterprise, cryptocurrency mining, and decentralized finance or fintech sides, I wouldn't be able to state anything in particular without knowing exactly what industry you would like to focus on.

I would just say that the industry can bring trillions of dollars' worth of value to the Canadian ecosystem and create a lot of jobs, value for GDP, and technology exports going to other countries.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

If I understood correctly, your 70 members aren't just involved in cryptocurrency, but also in all industries.

[Koleya Karringten]

Yes.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Okay, thank you.

Mr. Mandic, I'm showing you a pen that probably has 10 different parts to it. Yes, it's a product, but it's got ink, plastic, metal and all kinds of things in it.

When you were talking earlier about the breakdown of each product, I was looking at my pen and thinking.

We're going to look like stupid dummies in 30 years because we didn't....

Could blockchain technology one day be able to identify every element on the planet with a code?

[Patrick Mandic]

In the future, it could be. We could get there.

Now, we need to be practical. When it comes to implementation—

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

Can you come closer to your mike, please?

[Patrick Mandic]

In the future, it could be. This is very realistic.

We need to be practical. We need to think about what the 80:20 rule is that's going to get us there with the minimum amount of effort.

That is different for every industry. It's different for the geographies across the world. There are a lot of processes that happen inside factories that compose different materials, and you wouldn't necessarily attack everything and report everything.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

What about a human being? Every human being can have a code, for everything from the way they move around to their medical—everything. We see that in the future.

We're already seeing it on TV and in movies set in 2100 or 2400, for instance.

We were making a comparison with the Internet earlier. We don't need to go back 100 years. Today, if we could look at ourselves 25 years ago, we would think we looked a little silly because we had no idea what the Internet would make possible today and tomorrow.

Will the 8 billion, or maybe 10 billion, human beings have their own code, so to speak?

[The Chair, Liberal, Joël Lightbound]

Give a brief answer to a very large question, please.

[Bernard Généreux, Conservative, Montmagny—L'Islet—Kamouraska—Rivière-du-Loup, QC]

I'm quite far away, but I'm a visionary.

[Patrick Mandic]

My answer is that technology is a tool and it depends on how you use that tool. I don't know if the world will take us there, but we will see in 100 years.

[The Chair, Liberal, Joël Lightbound]

I've been hearing lately that we've made great strides in scientific progress, but that our strides aren't always as great in ethical and philosophical advancement. What you're saying raises all kinds of questions.

Go ahead, Ms. Lapointe.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you, Mr. Chair.

Mr. Mandic, you mentioned in your opening remarks that one of the sectors you're working with is the Canadian steel industry, and that your service can track steel origins.

Can your service help address the steel dumping issue?

[Patrick Mandic]

Yes. The technology can, certainly. It's a matter of how you're applying that technology and who is part of that technology.

One piece of the puzzle is getting Canadian steel producers to use the technology and say, “Well, I can guarantee that our steel is coming from these factories and, therefore, is Canadian.” There might be other steel coming to Canada in a way that is illicit, and that's where it would be interesting to have the CBSA follow the path of the U.S. CBP and use the same type of technology to get other industries outside Canada to also have to report on the origins of their product.

The technology is there. It's about how you use it. That goes well beyond the work we do as a technology organization.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

My next question is for Ms. Karringten.

There have been some issues raised that because there's no mediator or oversight with the blockchain technology, there are concerns about exploitation.

Can you tell this committee about the risk of exploitation of vulnerable people and whether there is anything we can do to mitigate those risks?

[Koleya Karringten]

I would take that to the potential with cryptocurrency.

We did see, back in 2017, when lots of initial coin offerings were entering the market, that a lot of people were being unfortunately scammed, being given false ideals on what they were going to get for returns, and taking monies from a market they shouldn't have had access to—basically mostly illegal crowdfunding.

I would strongly state that in Canada, since we've seen the 2017 ICO boom as well as the Quadriga collapse, we can feel a lot more confident if they are working directly with our Canadian virtual asset service providers and crypto trading platforms, because they are very regulated and do engage very strongly with our regulators across the country, as well as with FINTRAC and IIROC. It would be very unlikely to see initial coin offerings continuing to come out of Canada. It would be very unlikely to see instances like EINSTEIN, Quadriga, FTX continuing to happen in Canada, based on how our regulators engage closely with this industry.

I would personally say that Canadian consumers can be confident if they are directly dealing with trusted Canadian exchanges. With any of the companies that our consortium currently deals with, we do a very strong vetting process. We don't deal or engage with companies that we don't personally trust or wouldn't personally use or endorse.

[Viviane LaPointe, Liberal, Sudbury, ON]

Are there other panel members who want to respond to that question as well?