Industry Committee on Nov. 24th, 2022

[Tanim Rasul]

I would love to respond to that question.

I'm going to read a post on Reddit from the Canadian bitcoin forum. It's a post about my organization.

The title of the post is “Say what you want about the different exchanges, but NDAX called my mother and warned her that buying Bitcoin is risky.”

“I was talking to my mom about buying Bitcoin and suggested using NDAX, as I found that exchange reasonable and easy for my uses.

“My mother created an account, and in less than a day she got a call from Julia at NDAX warning her about the risks and dangers of Bitcoin. Julia was mostly concerned that my mom was getting scammed or being manipulated. They had a good discussion and Julia re-iterated all the things I've been saying as well (It's a risk, there are no guarantees, you can lose your money, do not invest more than you want to, and definitely not more than you can afford, etc).

“I was pretty impressed that they took the time to call and have that personal discussion with my mom and do their best to ensure she knew what she was getting into.”

I hope that is a window into how Canadian trading platforms such as NDAX treat more high-risk or highly vulnerable clients.

[Viviane LaPointe, Liberal, Sudbury, ON]

Thank you.

Ms. Karringten, I notice you're a co-founder of the Canadian Blockchain Association for Women. I'd be very interested in your telling the committee about your work on exploring the impacts of blockchain technology adoption on women and other unrepresented groups.

[Koleya Karringten]

Thank you.

I'm co-founding the Canadian Blockchain Association for Women with Alexis Pappas, currently the chief innovation officer with GuildOne; with Janine Moir, who's the national blockchain assurance leader at Deloitte; and with Pamela Draper, who is the CEO of Bitvo.

Our goal was to make sure that we had gender parity within the space. We feel that blockchain has an amazing opportunity to create better inclusion, not just [Technical difficulty—Editor] but under-represented groups. I believe it was one of our federal ministers who believed we could actually open up billions of dollars in GDP if we could create gender parity in the workspace.

Our organization has produced lots of webinars and events trying to encourage women to explore the space, but we've also done fundraising to develop out bursary programs to help women get educational training within the space and networking opportunities with organizations so they can explore the potential.

Our group is fairly active. We're currently merging with the Canadian Blockchain Consortium through an inclusion committee. We're bringing on about 20 members of diversified, under-represented groups within our inclusion committee, and are able to put the full resources of our consortium behind that to develop even more educational programs. We have a lead for this committee. Her name is Melissa Smith. She's a partner with BLG and is going to be chairing this to make sure we host even more events and support even greater fundraising, to make sure that women and under-represented groups get the educational training they need so they don't get left behind in this new wave of technology coming forward.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Thank you, Ms. Lapointe.

Mr. Dreeshen, you have the floor.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Thank you very much, Mr. Chair.

I'm really happy to be back here at the industry committee. I think the people I recognize the best are the clerk and the analysts, but it's certainly nice to be able to discuss this.

In the meantime, I've been at the environment, natural resources and international trade committees, and I think some of the discussions that we have here certainly tie into what we've been looking at.

In the analysis that we were given by Mavennet, I noticed a digital passport for a barrel of oil that indicates where it comes from and all of that type of thing, and I think that's so critical in this discussion. Where do these things originate? What is the final use of that barrel, and when that product is used, where do those molecules go? I think that's the whole thing that we're trying to analyze here.

I think it's important, but here's the point that I want to delve into. There are the environmental impacts and human rights—if we just take a look at energy. All of these sorts of things are great. We talk about how we can then sell our product—if people would appreciate what we do—around the world, and people would see how we manage the environment, how we deal with greenhouse gases, all of the achievements that we have. We'd have something to sell. However, once it gets mixed into the big pot where all the oil is, how do we know that our oil is contributing what we want it to contribute? So, if you're taking oil out of some African country and you're mixing that in, how are you ever going to get them to commit to participation in this particular type of project?

Perhaps, Mr. Mandic, you could talk about that. We can say what we want about what we have and where we're going to sell it, but if the rest of the world sits back and says, “Well, we're not going to do that; we don't want to commit ourselves”, how are we going to make that work for us?

[Patrick Mandic]

I think there are a couple of layers to the answer to that question. First of all, as you said, there's a differentiator. We're the ones making the product. Therefore, if you appreciate it, then you'd rather buy product that you know than product you don't know. Just with that, we're already better off.

The second layer is that we're not the only ones; we're not the first ones. The EU is putting together the digital product passport as well. CBP is starting to create that digital platform for you to report automatically, so we're not the only ones. The key here is that, if we have enough critical mass—first within Canada, then within USMCA and then with our allies—then all the rest will start to be forced to use the system if they want to participate.

That's the journey. It's not tomorrow. We're starting small, but that's the journey.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

Well, we say that. In Canada, we do some amazing things, and we can all go through how the lists of the products that we have and the things that we're going to sell around the world are great, but we somehow seem to demonize that. We're always fighting that. There's always this political to and fro. People are saying, “Well, environmentally, we want to ensure this”, so you go buy stuff from someplace else where they don't care.

That's the point I'm getting at. If we take a look at authoritarian governments, there's no help in human rights. They're protecting their oil and gas industries, which are then being sold off before any of that money is ever shared with their countrymen. These are the sorts of things they do, and I'm just asking how we ever get to that stage where that blockchain becomes a benefit. You know, I'm kind of talking about the same thing.

[Patrick Mandic]

Yes. In my mind, we need to do it because otherwise it doesn't make sense that we produce a greener product here in Canada when someone overseas produces a product—while we're imposing regulations here in Canada for companies—and produces it cheaper with a higher environmental footprint. So, we need harmonization of those CO2 emissions.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

With that same thing, eventually our companies are going to go someplace else because they can't make it here. Everyone is looking at a pen, but just looking at the phone, you look at battery production and all of the other things that are associated with this, and if you don't know where it's coming from...and then you say, that's okay, I just bought a phone, but where did you buy it from?

[Patrick Mandic]

Exactly.

[Earl Dreeshen, Conservative, Red Deer—Mountain View, AB]

I think this is the advantage that blockchain has and I think that's really a critical aspect of this.

Is my time just about over?

[The Chair, Liberal, Joël Lightbound]

It is, Mr. Dreeshen.

Now, if you don't mind, committee members, I will take the five minutes that the Liberals have for questions. I see consent.

[Some hon. members]

Agreed.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

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

Chair, take as much time as you'd like.

[The Chair, Liberal, Joël Lightbound]

Okay, thank you, so I'll take the rest of the time. I have been very generous with everyone.

To begin, I'd like to give all of our witnesses today the opportunity to send their recommendations in writing to the committee, if they have any. We want to know whether they have specific recommendations, both to support innovation and growth in their sector and to protect consumers. So if they have any fairly specific suggestions, we would ask them to send them to the committee through the clerk.

The first question I have is for Mr. Rasul and Mr. Amiouny. It echoes a line of questioning that my colleague, Mr. Erskine-Smith, had last week in committee.

I gather that based on the regulatory framework we have for exchanges here in Canada, something like FTX wouldn't have happened here. However, how can we make it even better so that Canadian exchanges are renowned for their safety, their security, their consumer protection?

One of the questions he had was on the responsibility of exchanges when it comes to listing different tokens and what kind of due diligence they ought to do. He was highlighting LUNA, which is, I think, a good example.

To what degree do you think exchanges should be responsible for the tokens that they list, and what kind of due diligence should they do?

I would start with Mr. Rasul, and then Mr. Amiouny.

[Tanim Rasul]

All assets that are listed on NDAX have to go through product due diligence and our coin listing process.

With LUNA, it was difficult to see what happened with that token. At one point it was really one of the most popular tokens across the globe. If you look at Coinbase, which in my opinion has the most comprehensive due diligence process for listing tokens, they also passed LUNA to be able to be listed on that platform.

It is part of our responsibility to ensure that tokens that are listed on our platform are vetted enough that we're comfortable having them on the platform.

As far as the LUNA debacle is concerned, it was really tied to the UST stablecoin, the sister token of LUNA. The depegging of that algorithmic stablecoin had the foundation that runs LUNA and UST to sell massive amounts of Bitcoin and LUNA tokens, and then mint more LUNA tokens, thus devaluating that asset.

If we could look back and identify that relationship and if we could have foreseen that the foundation was going to take those steps to repeg the algorithmic stablecoin, we wouldn't have listed that asset, but like with most global platforms and Canadian platforms, the token was listed.

We need to learn from it and we need to take responsibility for any token that's listed.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Rasul.

Mr. Amiouny, go ahead.

[Jean Amiouny]

Chair, at Shakepay we never listed any of these cryptocurrencies. I think we've taken a more conservative approach as to what is listed on the platform.

There are maybe different ways to look at cryptocurrencies, and I think we talked a little bit about some of the use cases here today. I think in some way Bitcoin stands somewhat on its own in the product that it offers and the service that it offers to the worldwide community.

I think it very much depends on the exchange and what it is that the exchange is trying to do. I certainly think that at Shakepay our mission is to get Bitcoin into the hands of as many Canadians as possible, and hopefully we'll be able to do that.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Amiouny.

That allows me to segue beautifully into my next question.

Before I do so, if you have any insights—and I'm thinking of Mr. Rasul—in terms of how we could make it so that due diligence is better and tokens that are listed are legitimate projects going forward, please feel free to communicate that. That goes for the other witnesses as well.

My last question is more open-ended and more philosophical in a certain way.

When you look at the white paper by Satoshi Nakamoto in 2008, clearly it was a reaction to the 2008 financial crisis, the greed and excesses in the traditional financial sector and then the governments bailing out large institutions. Looking at where it originated, for instance, the cyberpunks' threads and chats on this, at how Bitcoin was used to fund WikiLeaks, how Anonymous used it, how Occupy Wall Street to some extent used it in other ways, 10 years ago I would have thought that the left would be all over this. It turned out to be quite different.

Mr. Amiouny, you mentioned the case of Lebanon. I think it's a fascinating example. They have a currency that has lost, I believe, up to 95% of its value, and banks have prevented withdrawals in many instances. A lot of young Lebanese have turned to digital assets, Bitcoin and others.

I'd like to understand it from your perspective. As a progressive 10 years ago, I would have told you that the left would be completely on this technology and would have embraced it. Now we see this big divide, where it's become really partisan and more associated with the libertarian right.

My question is—and I'd like anyone who wants to chime in to go ahead—what would be your message to progressives when it comes to this technology? How do you see it as being potentially useful, for instance, to bank the unbanked? We know that there are two billion people in the world who don't have access to financial services. How can this be used?

[Jean Amiouny]

As I said in my opening statement, I see Bitcoin as this public good, in the sense that it is accessible to everyone and is always available, which means that anyone at any point would be able to access this network. It is very much like the Internet today, where it is essentially a public good. We have cheap, reliable Internet in Canada, and this is after decades of work in industry and in government.

I see Bitcoin as a similar public good that should be available to all Canadians, so that they would be able to transmit money across borders to families in Lebanon, Argentina and many other countries in the world where banking services are not as solid as they are here in Canada.

To me, I very much see this as a platform that allows anyone to have the ability to access some new technology that allows them to do things they couldn't do before.

[Andrew Batey]

I'd like to say that outside of the cryptocurrency side, the underlying blockchain, which was mentioned briefly earlier.... The best way to think about it is like a database, like in Excel, but one that you can trust. Think of all the places you use Excel, but it's not fast, it's not [Technical difficulty—Editor].

In our case, with fraud, the fraud exists in that database forever. Once we find it, we can backtrack to all the places where fraud existed until we find the root. In that context, thinking about blockchain as a database and not just as a cryptocurrency, what are all the amazing database applications that this underlying technology can be used for? You can use it for driver's licences, houses—for the deeds—wills. There are so many amazing places that a fast database that's immutable can be used, where maybe there isn't trust and now you don't need to trust the other partner to participate.

I think if you separate cryptocurrency from blockchain, there are some really powerful opportunities here to leverage the underlying technology and progress Canadians and the technology of blockchain further.

[Koleya Karringten]

I would like to add to Andrew's point there.

There was a country in Africa that ended up doing land titles on blockchain. Their current speed of doing it was maybe being able to produce 50 per year.

When you go into third world countries where people don't specifically have a paper deed or proof, but they've been sitting on that land for multiple generations, based on the fact that they don't have a deed or proof of ownership of that land outside of the fact that generations have been there, a lot of people are not able to get access to traditional banking, and they not able to get access to loans. They also don't have any security if somebody comes in and tries to remove them off their land. By utilizing blockchain technology, they were able to speed up being able to give people who had, I guess, potential squatters' rights or generational rights to their land a verified deed to that, and they were able to get about 200, so they were able to quadruple it within that year, giving more and more people in that country better access to banking, loans and security on that.

Another piece I'd like to mention is that, when Satoshi Nakamoto or that group came out and released that paper in response to that financial crisis, a big part of it was due to the fact that, when you see high levels of inflation and more and more dollars being produced, and we don't produce as many goods as we're currently producing dollars, it costs people around the world more of their dollars to be able to gain access to that same amount of goods.

We're seeing it right now in places like Argentina, which had a 198% rate of inflation. People in Argentina are now scrambling to get access to Bitcoin because, despite its volatility, it is still a scarce asset. There are only 21 million of these Bitcoins, and their value does continue to increase over a long period of time. It's not exactly a get-rich-quick scheme, but people there are starting to put the money that they're able to into Bitcoin because, for them, it is a hedge against inflation when their governments are producing such rampant amounts of their currency.

It also helps to give people access who are currently unbanked. The reason El Salvador was able to pick it up was that 60% of their population currently didn't have banking. Now family members in Canada are able, just through an app on their phone, to send them remittance payments that they could easily get access to at any time of day and be able to buy goods that they need, like food, medical supplies or anything like that. It is definitely for social good.

[The Chair, Liberal, Joël Lightbound]

And that's without going through MoneyGram or Western Union, which is certainly positive for them, I would say. Thank you.

That's all the time we have.

Committee members, thank you for giving me double my five minutes. I would like to thank the witnesses for making themselves available this afternoon. Lastly, I would like to thank the interpreters, the analysts, the clerk and all the support staff.

The meeting is adjourned.