Industry Committee on Dec. 8th, 2022

[Jesse McWaters]

I would concur that there's value to interacting with our trading partners, but like Mr. Anani I would suggest that looking at the MiCA comprehensive crypto-asset regulation in Europe would be valuable, as would looking at a number of the international regulatory standard-setters that exist in this space.

There is extensive work under way by the Financial Stability Board and the Committee on Payments and Market Infrastructure of the Bank for International Settlement on setting appropriate standards in this space, as well as, specifically within the context of KYC and AML, the Financial Action Task Force. All of these are helping to establish standards that can then be interpreted within national regulatory jurisdictions in ways that promote regulatory harmonization and heightened levels of compliance.

I would suggest that Canada be as actively involved as possible with those ongoing undertakings, which are in flight at the moment.

[Brad Mills]

Mr. Chair, that was a great question.

I would also frame this in terms of the need for us to be progressive in looking at regulations. The SEC has a really great framework around what is a security and what is not a security, and we should definitely be working with United States regulators to apply that here. However, I think we also have to look at what the demand is for using things like stablecoins in Canada, with more and more people needing to send remittances across borders with Bitcoin and stablecoins. Why don't we have more progressive banking regulations here in Canada to allow companies like challenger banks to come up into Canada, like Cash App and things like that?

I think we shouldn't just be trying to clamp down more on things. We should be trying to follow the lead there as well as using open banking a bit more and giving consumers more of a choice.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Mills.

That was all of your time, Mr. Masse.

Before moving on to Mr. Généreux, I need the unanimous consent of the committee members to extend the meeting by at least 20 minutes.

Since no one has voiced opposition, silence means consent.

You have the floor, Mr. Généreux.

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

Thank you, Mr. Chair.

Thank you to all the witnesses.

Ms. Woods, in the spring we experienced a passport crisis in Canada. In response to Mr. Dong's question, you said that the government could use blockchains.

Whether for the issuing of federal passports or provincial driver's licences, would there have been a faster and more secure response if blockchain technology had been used?

The passport issuing process is already very secure in Canada, and there's nothing to indicate that it's regularly targeted by fraudsters. If blockchain were used, would it make the process more secure and would it take less time?

[Tanya Woods]

The short answer is yes. Canada undertook a trial regarding passports. There was actually an innovation effort done some years ago, I believe, with the Netherlands. It is possible. In retrospect, hindsight is 20/20, but it's not too late. We're going to have to do this. The world is moving in this direction. There's a very natural evolution toward biometric passports that will really secure these credentials.

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

Is blockchain really foolproof?

You mentioned identity earlier. I put that question earlier to a witness at a different meeting. There are eight million people on Earth. Could we one day have a system based on blockchain in which each individual would have everything about them linked to their identity, including what they consume, even groceries? That would make us all, individually and collectively, part of the same system.

[Tanya Woods]

When I speak to the context of human trafficking, there is innovation happening. I'll let my friends participate, because I can see hands up as well. On the question of incorruptibility, I am certain there are comments to add. When we speak of something like human trafficking, one of the solutions I'm working on is with Global Innovators. The solution is thinking through customs and border officials who have to read passports. Oftentimes, these documents are falsified. People are given fake identities so they can be pulled across the border and continue to be trafficked.

In this case, this is another set of government representatives working with other government representatives around the world to try to design a system so that it can be stopped. This is a fantastic use case. It's a very important use case. When we talk about digital identity, it needs to be incorruptible, but cybercrime will continue. Cybersecurity threats will continue, so money and the expectation of constant innovation should be there.

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

Did you have anything to add, Mr. Déziel?

[Guillaume Déziel]

Yes. If you had to make a dozen eggs secure, would you tend to put them all in the same basket or place them at different locations?

Firstly, the design of distributed technologies makes them a better response to security issues, because not all the data is in the same location.

Second, there has been a lot of conversation about how quantum computers might be able to crack blockchain technology. Until proven otherwise, and I'm talking about Bitcoin here, many believe that the difficulty involved in proof of work, because the structure is changing all the time by those using the data, is such that it can be protected and resist a quantum attack.

I would say that blockchain technology is much more secure than putting all your eggs in the same basket, by which I mean a central database somewhere in the cloud.

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

Thank you.

Ms. Leverton, you spoke about innovation and how the government could take advantage of opportunities available through these new technologies. Based on what the previous witnesses have said, there is currently a brain drain in this field.

What sort of government assistance would you like to see for these technologies with a view to supporting innovation in Canada?

[Jaime Leverton]

The lack of clarity and the lack of support from a funding perspective have ultimately driven a lot of our talent away. Canada was very early in this ecosystem. Tons of talents were born in Canada. They are subsequently taking their businesses, their innovation and their property, and establishing themselves elsewhere in the world.

We've touched on the UAE a number of times throughout the past couple of hours. I've had the privilege of spending quite a bit of time over there. It has done an incredible job of attracting and supporting talent and start-ups in this space. It's working collaboratively between the public and private sector, with the support of the sovereigns. It's doing an incredible job of taking a leadership position in building up those ecosystems and owning global talent, much of which is Canadian.

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

Mr. Chair, do I have a bit of speaking time left?

[The Chair, Liberal, Joël Lightbound]

I'm afraid you don't really have any, Mr. Généreux.

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

Thank you.

[The Chair, Liberal, Joël Lightbound]

I'm sorry to disappoint the witnesses.

I will now give the floor to Mr. Fillmore.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you, Chair.

I'll be sharing my time with our esteemed chair.

It occurs to me that we've heard a lot of testimony that blockchain is very effective for secure transactions or digital identity. You can spend time and you can mine for coins and make some money.

I would like to turn the conversation. It's more of a philosophical answer that I'm looking for.

Mr. Gauthier, you used the term “collective intelligence”. That was very interesting to me.

What are your best hopes for blockchain to uplift us as a culture and as a society? What is the promise of blockchain that we're not seeing when we focus too much on making money from it?

[Jean-François Gauthier]

Thank you for your question.

I believe that blockchain technology is a historic opportunity for giving power to the people, by giving them the capacity to manage their information themselves. I firmly believe that each individual ought to be responsible for managing their personal information. As was mentioned earlier, blockchain could give citizens the ability to manage their personal information and decide whether or not to authorize communication.

Apart from information management, one of the aspects in which I am most interested from the democratic standpoint is the current loss of confidence in our democratic system. Concrete measures are needed to give citizens back their ability to partake in public sector decision making. People have to become directly involved.

We need to make use of this intelligence to make decisions based on facts. It's called outcome-based budgeting. So we need to use our citizens' intelligence to help make decisions, and to determine the directions of our programs, on the basis of facts rather than opinions or habits that lead us to place our money where we expect it has to be placed because that's what we've always done.

A major paradigm shift is needed in how things are managed. Digital governance means open governance. Through the use of a digital tool, people are going to be able to participate much more actively in the decision-making process.

[Andy Fillmore, Liberal, Halifax, NS]

Thank you, Mr. Gauthier.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Fillmore.

Mr. Mills, I will go to you. I hope you'll have the chance to answer.

I was listening recently—and I'm not sure I understand it all, because I'm not a technology geek—to Gary Gensler's MIT class on Bitcoin and blockchain from 2018. Gary Gensler, for those who don't know, is the chairman of the U.S. Securities and Exchange Commission.

What struck me were the two things the class focused on, which were the technological innovation of Satoshi Nakamoto with blockchain and how it solves, for one thing, the double-spending problem, as well as monetary innovation.

One thing I noticed from Gensler was that he said Bitcoin has the potential “to be a catalyst for change in the fields of finance and money”.

I'd like to hear you, Mr. Mills on what the value proposition of Bitcoin is.

[Brad Mills]

As I've said in my opening statement, that's something that is really important to me. It's the reason I'm still in Bitcoin 11 years later, and why I'm spending my money and putting my money where my mouth is to help the billions of people around the world who live under some sort of financial oppression.

This is a real problem that we don't really pay too much attention to here in the west because we have a money system that works. We have banks that work pretty well. It's not something we think of as a day-to-day need—that we need Bitcoin as payment method—but for people I'm talking to and working with in Nigeria, El Salvador and places around the world.... I mean, there are 200 million people in Nigeria who are experiencing hyperinflation right now, and they're turning to Bitcoin as a tool that's kind of like a shield to pick up.

Earlier, something was mentioned about Bitcoin not being used as a tool for protecting against inflation. That's another thing we should try not to be partisan about, where we look at something someone says and then ascribe those values. Bitcoin is a tool for good for the world and for the billions of people who live under financial oppression. For people in Nigeria, even though Bitcoin maybe went down 70% from when some of them bought it, they're currently limited to withdrawals of $45 naira a day from their accounts, so they have no choice but to turn to something like Bitcoin. As well as companies, like mining companies that do off-grid mining, there are 300 million people in Africa who don't have access to secure power. Bitcoin positively impacts the grid and, in a way, is going to accelerate the world's adoption of clean energy.

I think Bitcoin is a tool for freedom. That's one of the things that makes me so excited about Bitcoin. I would love to see more people who are in poverty in Canada be lifted up and be reframing themselves from short-term thinking to long-term thinking and saving. Trading cryptocurrencies and minting NFTs and trading them might be fine if you're a stock trader or something like that. The real innovation here is being able to save in a disinflationary money that is free from the corruptible influences of a CEO or any world government that can change the monetary policy on you, as billions of people are experiencing all over the world.

[The Chair, Liberal, Joël Lightbound]

Lebanon is also a quite telling example of that, with people being prevented from withdrawing from the traditional legacy banking sector.

That allows me to pivot to Madam Leverton. I'll ask this in French.

Ms. Leverton, you mentioned Bitcoin mining by Hut 8. What's the environmental impact of this? It's a question that often comes up.

I'd also like other witnesses to comment on the environmental impact of cryptocurrency mining, and Bitcoin more specifically, which require a lot of energy.

[Jaime Leverton]

Yes. Mining in the context of your question is really proof-of-work mining. Proof of work is the type of mining used for Bitcoin. Ethereum used to use that same technology, but recently moved to proof of stake.

Brad did a very good job of touching on it. We in the mining industry see it as a potential for significant good in addressing the environmental crisis and helping to fund a faster move to cleaner energy and cleaner technologies. We're seeing incredible innovation happening, with people converting what would otherwise be flare gas or waste gas into Bitcoin mining at flare sites, which keeps that carbon from being emitted into the atmosphere. We're also seeing incredible innovation happening in using landfill waste as a source of energy to be converted into Bitcoin, reducing the landfill emissions.

Brad talked about the work being done in developing nations, where a mine can be set up and help support the creation of new clean energy, a mine that otherwise wasn't able to be created, in part because of the transmission and distribution problems, whereas a Bitcoin mine really can be set up in very remote areas and act as a way to digitize energy. What Bitcoin really is at the end of the day is digitized energy, which can then be transferred in a seamless and decentralized manner.

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

I'm giving the floor now to Mr. Déziel and Ms. Bouchard.

[Guillaume Déziel]

What I'd like to add to the environmental argument is the fact that it really depends on the energy sources. We in Canada have are fortunate to have more clean energy sources than anywhere else in North America. When doing the calculations, the energy source has to be taken into consideration before examining the energy consumption aspects if we are to get an accurate calculation for the environmental impact.

Moreover, Bitcoin and other non-inflationary cryptocurrencies also provide a solid foundation for lowering energy use. If we are going to discuss the environmental footprint, then it's important to ask whether the economic system within which we operate, the debt-based monetary system that constantly goads us to consume more, is necessarily the right foundation to build on.

I'll end by pointing out that paper money has not been backed by gold since 1971, and is now tied to a country's sovereignty, and hence its status, along with its military and geopolitical alliances. That means it can go all the way to nuclear weapons. That's been included in the arguments. What's really needed, then, is an attempt to put it all in perspective when we ask whether or not Bitcoin mining is a pollutant.

[The Chair, Liberal, Joël Lightbound]

Ms. Bouchard, Please be brief. I've been overly generous towards myself and my speaking time has come to an end.