Industry Committee on Feb. 1st, 2023

[Dina Mainville]

Yes, and could I clarify?

When you talk about the money that's sent to the United States, are you referring to the business that's leaving Canada and going to the United States?

[Sébastien Lemire, Bloc, Abitibi—Témiscamingue, QC]

I'm only talking about the money that is sent there. In traditional banking operations, every amount requires a level of liquidity to allow the money to be distributed, but this money is sent to the United States. If a company goes bankrupt, the likelihood of people in Quebec or Canada recovering their funds is accordingly almost zero.

[Dina Mainville]

Yes. Thank you for clarifying.

I would say that the other complexity in a case like that is the inability for law enforcement to effectively resolve those investigations. If you have digital assets that are sitting in a jurisdiction like the United States....

Let's say that the RCMP is conducting an investigation. They have to engage in an MLAT process, which could take a very long time to do. They're very bureaucratic, and it's much easier if those assets stay within the Canadian borders.

[The Chair, Liberal, Joël Lightbound]

Thank you.

Mr. Masse, you have the floor for two and a half minutes.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

I'm trying to see a way through this. One of the things that were really effective—and I always refer to something I'm more familiar with, the auto industry—was back in 2002, when then minister Allan Rock convened a summit, so to speak, in Toronto that was one and a half days. It took the auto sector—not only the manufacturers and the OEMs but also the aftermarket, the dealers, a whole bunch of environmental groups, some of the new mould-makers, tool and die makers—all the different components. There were probably 200 of us who were then put into distinct areas to develop a Canadian auto policy.

The organization exists on paper right now; it isn't really what it was before. What it did was give us an interesting framework. Green light was the stuff we were doing well. Yellow light was the caution that we had some stuff going and it was okay, and red light was the big problems.

Are we at the point to pull all this stuff together on a strategy similar to that? I'd like to hear if anybody has any thoughts on that.

Here's what I worry about. We have these committee hearings. We have recommendations. We table the report in the House of Commons. Then it has a period of time for the minister to respond. Then, from the response, we wait to see what happens next. I want to caution all the witnesses that if we lose traction on this committee, then we really don't have any other place to go at the moment unless the finance committee takes it up.

Are there any thoughts from anyone, please? I only have about a minute to go. You can also submit them to us. We need advice on how to go forward.

[Daniel Brock]

I would say, from our vantage point, having met advocates for the digital asset mining sector, it's as though you're confronting a major perception problem. There's a massive amount of education that has to happen for regulators and for decision-makers such as yourselves, and you're doing it in the context of a media portrayal of the industry that is just so negative these days.

In trying to resolve this tax amendment issue with the Department of Finance, it's frustrating because just in interacting with the department, with department officials.... They're very smart, capable people, and they're doing their best, but there hasn't been any meaningful interaction between those officials who are drafting the laws and government decision-makers who are having these laws passed to really understand what's happening in the industry, and it is a rapidly changing industry.

Your idea of bringing together a comprehensive government approach to looking at many facets of this is very appealing, because it's something that you can focus on, that government officials and lawmakers can focus on, as the place where this discussion can be advanced, and advanced in a meaningful way.

What's happening now is very transactional. We're trying to put out fires here and solve problems there, and it's a challenging environment for stakeholders who are trying to engage effectively with government.

[Brian Masse, NDP, Windsor West, ON]

It almost feels like we can't find a starting line.

Thanks, Mr. Chair.

[The Chair, Liberal, Joël Lightbound]

Thank you very much, Mr. Masse.

Mr. Généreux, you have five minutes.

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

Thank you, Mr. Chair.

I'd also like to thank the witnesses for being here.

I'm going to continue in the same vein as Mr. Masse.

I agree with him. I think we need to be educated about this, as Mr. Brock pointed out. Organizing a summit in Ottawa would be very complicated. Unlike the witnesses, we are not all specialists in this area.

Ms. Mainville said that her organization was represented by various associations. I think that a summit should be organized in Ottawa, where people could meet their Canadian industry counterparts as well as government officials. We're talking about things that could be interrelated. Many meetings on bitcoin and other topics have been held in the United States, in Texas I believe. Parliamentarians are interested in more than just cryptocurrency.

The blockchain itself is very important.

There will be all kinds of opportunities in this area, moving forward.

Ms. Mainville, I'd like to ask the various associations you represent, as well as you yourself, to consider the possibility of organizing something in Ottawa as soon as possible. I believe it would be in your best interests.

I personally feel that this will become a part of the economy in the future. We do need to look forward. It didn't even exist 25 years ago. Things have progressed at lightning speed. We're already talking about ChatGPT, OpenAI and quantum technology. All of these are interrelated in a way, at least to some degree. We'd be happy to host you here in Ottawa.

Mr. Buchman, I understand that you established your company in 2016. You smiled when I mentioned OpenAI and ChatGPT. I'm 60 years old and know almost nothing about all these apps, but I do understand their potential. What I'd like to know is how Canada can become a global leader in this field. I'm thinking about Montreal in particular, which is already well ahead of the curve in artificial intelligence. What do you think, Mr. Buchman?

Mr. Morphy, you would appear to be an anglophone, and you have facilities in Brossard and Sherbrooke.

Why is that? Is it the price of electricity? What are the reasons you located in Quebec?

Thank you.

[Geoffrey Morphy]

Yes, I'm absolutely in favour of convening a meeting with the politicians. Education is so important.

We've been advocating for a long time that we need regulation. It's going to help the industry. We have a lot of smart people, both within the company—our advisers—and I talk to and engage with many people across the country who know this industry very well and have great ideas.

I commend you for this idea. I think we should, as a group, pull together public and private parties and engage in these discussions, and I think good ideas will come out of it. I think we can take a leadership position. Other countries are not as nimble as we are. We have a great system. If we pull people together and put those people in this room together, you're going to get good output and you're going to get constructive ideas whereby you can then craft regulation and ideas and the types of things that will make politicians, consumers and businesses a lot more comfortable to do business.

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

Mr. Buchman, would you comment?.

[Ethan Buchman]

I don't want to give the impression that I'm against AI as a technology. It's obviously very powerful and has tremendous potential. My concern is about who's going to own it, who's going to own the data that powers it and who's going to own the benefits it generates. Right now, who's going to own it means Google, Meta, Amazon and so on. These are all American multinationals that are highly unaccountable and extractive—that's the term I used in the opening statement—and the promise of this technology that we're talking about, blockchain technology, is that we can democratize ownership of potentially any technology, whether that's artificial intelligence, quantum computing or otherwise.

The opportunity that's present for Canada to start to repatriate so many of the brilliant Canadians who have gone to the U.S. to work for these companies or for others is to invest in the blockchain cryptocurrency industry at home. Tell the banks, give us bank accounts and pass other regulations that make it easy for companies to get started and build this stuff so we can democratize the ownership and mitigate the risks of these very powerful technologies like AI and others. That's really what I'm advocating: that we invest in education and in enabling companies to be set up and to be successful within Canada and grow in Canada.

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

Ms. Mainville, I'd like to hear what you think about the possibility of organizing a meeting in Ottawa with all the industry stakeholders, or even perhaps to hold a trade fair where people could talk to various suppliers. We really need to understand and learn more about this field.

Personally, I need to know that a glass is really a glass and I want to hold it in my hand. Everything is so virtual these days that it's important to be able to meet people in person and actually shake hands.

[Dina Mainville]

You have my absolute commitment to participate in and help organize something like that.

I did some work for the World Economic Forum several years ago when they were looking at developing frameworks that governments could take. I think the committee that I was on was blockchain specifically for financial inclusion, and the approach that they took was taking individuals of varying expertise from different companies and representatives from different parts of the globe, putting them together in a room and then giving them problems to solve that they had to document.

Rather than just having a summit where we can mingle and talk about things, I would also go one step further and propose that we also look at coordinating some breakout sessions, working groups, where we can put pen to paper on some of these issues.

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

Well, you don't have to do that now; you have ChatGPT. ChatGPT is going to solve your problem.

[The Chair, Liberal, Joël Lightbound]

Thank you, Mr. Généreux.

Now that we know how fond you are of ChatGPT, we'll have to check from now on to determine whether your questions were prepared by the system.

It's my turn to speak now, because my colleague Mr. Gaheer kindly gave me his speaking time.

I'll begin by openly admitting that I have some digital assets, as do a good many millennials like me, who understand the interest and value of the underlying technology of things like bitcoin and various other digital assets.

It's a topic that I take a keen interest in, and I think this discussion with thoughtful witnesses like the ones we have today is really important in dispelling some of the myths and some of the intellectually lazy ways in which this technology has been portrayed in the media, so I appreciate your efforts to educate us and the Canadian public on blockchain.

Considering that we have the Digital Asset Mining Coalition with us, the way I understand it, mining bitcoin, for instance, which is the digital asset that requires the most energy because of its its proof of work mechanism, allows, for instance, provinces or Hydro-Québec to never waste electricity, given that you can turn it on and off as you wish, which is very different from other industries. The way I see it, you monetize the energy that would otherwise be lost.

Can you expand on that? We keep hearing that it consumes a lot of energy and that it's bad for the environment, so I'd like to hear your take on that.

[Daniel Brock]

It does consume a lot of energy, but if it's clean energy. It's not bad for the environment, and many industries consume a lot of energy. Canada has a decided advantage because we have an abundance of clean, renewable energy. This idea of a load that you can turn on and off is very important; it adds to the efficiency of the grid. It's load that you contribute to the base, and you're shrinking the delta between the base and the peak. The people who run grids are worried about peak demand, but if you shrink the delta between those two, you're making that grid more efficient, you're monetizing the power, and the grid's able to reinvest in improving distribution and transmission of the grid. It is actually a positive story. I mean, Bitfarms had the experience just today.

Mr. Morphy, maybe you want to talk about what you were telling us before.

[Geoffrey Morphy]

Certainly.

We have 148 megawatts operating in the province of Quebec. This morning, when we woke up, it was -22°C in Brossard and -29°C in Sherbrooke. Hydro-Québec had already given us the heads-up that for a number of days this week there would be something called délestage, which is curtailment. It's part of our arrangement with them. It's part of our co-operation that when the grid needs this type of power, it can be elastic, with people like us operating in good faith with it.

This morning, all our power in Quebec, with the exception of 1.52% of it, was curtailed, and we shut down our operations. Between about six o'clock and slightly after nine o'clock this morning, that power was directed back into the grid to where it was needed for households and industries that needed critical power to stay warm. Then, when that surge of power was balanced again—somewhere between 9 a.m. and 9:30 a.m.—they gave us a signal, and we started turning back on again. We're back in operation. I think it's supposed to be a little warmer tomorrow morning, but Friday and Saturday are supposed to be very cold, so I expect they'll ask us again and we will shut down again. That's what is possible.

Just to expand that, we would like to have more co-operative discussions with Hydro-Québec and some of the other hydro utilities to go to where they have surplus power—stranded power, as we call it—and set up our facilities closer to the dams that would otherwise spill water that would never go through the turbines. We want to monetize that. We want to improve the grid. We're a baseload, so if we take X amount, we're going to take it 24-7 and we're going to pay for it.

There's a real gain for everybody in optimizing grids by having people like us as part of them. I think those co-operative discussions to have us go to where the power is generated and where it's needed and where it can be maximized are important. That's what we can do; the old industry couldn't do that, but we can.

I think that's where we also need some leadership and open conversations, because, as I said, education is needed here. There are a lot of closed minds. We can be very beneficial to the grids and to the value in Canada.

Dan, do you want to continue?

[The Chair, Liberal, Joël Lightbound]

Thank you very much.

Just quickly, do you have any idea of the percentage of bitcoin mining that is sourced in clean energy worldwide and in Canada?

[Geoffrey Morphy]

The Bitcoin Mining Council is a collective group of, I think, 52 bitcoin mining companies. They're primarily American and Canadian. Some are public and some are private. It represents about half of the global network, about 48%.

In the bitcoin mining network, 63% of the members utilize renewable power. For Bitfarms, our global footprint is over 95%. In Canada, we are over 99% .

[The Chair, Liberal, Joël Lightbound]

Thank you.

I'll give myself just a bit more time. I've been generous with everyone, so I'll be generous with myself as well.

I have a quite open-ended question for Madame Mainville.

You mentioned in your remarks that blockchain provided innovation in game theory. Can you expand on that?

[Dina Mainville]

Yes. It's a great question.

Without getting too technical on the matter, the way I'll explain it is we have seen with this technology the availability of a new monetary system in which incentives look very different from the traditional monetary system. The reason you typically use intermediaries is that if you have two parties in a transaction, you want to make sure they both could be honest, so you have someone in the middle who's kind of mediating between.

With blockchain technology, because of the way the systems are designed, you can actually have code that is basically executing decisions for you. It creates these wonderful new value-generating opportunities. This is what I was talking about when I was referencing that.

[The Chair, Liberal, Joël Lightbound]

Okay. Thank you very much.

I'll go for one last question, because I see that my colleagues agree with my taking some more time.

Mr. Buchman, to go back to your introductory remarks, this morning Beirut announced it was devaluing its currency by 90%, which is not even representative of what the reality is on the ground. It's much worse than that. What's the interest for someone, say, in Lebanon, to transact in digital currencies?

I'll just highlight that the IMF recently said that 60% of emerging economies are at risk of default in the coming months.

What can be the interest for people in Lebanon, and other countries as well, for using digital currencies?

[Ethan Buchman]

Yes, we've seen a number of reports of folks in Lebanon and other countries, where their currencies are being devalued, turning to bitcoin and other cryptocurrencies as a store of value.

Of course, these are highly volatile instruments, as we all know. This committee has talked about the volatility of cryptocurrencies many times, but we're also talking about extremely volatile and unstable national currencies as well. We've seen a lot of volatility even in supposedly gold standard bonds and other kinds of securities. We've seen tech stocks drop huge amounts. Currencies all over the world and all kinds of different securities are experiencing this kind of volatility.

Cryptocurrencies offer an opportunity. They offer a way to escape certain authoritarian regimes, ways for families in these countries to try to protect their wealth and potentially to escape with it. We've heard reports that refugees fleeing Afghanistan when the Taliban took over and fleeing Ukraine when the war started were using cryptocurrencies as a means to safely transport and secure their wealth.

There is huge potential. This is why I tried to emphasize that these technologies are really extensions of base tools to preserve international human rights, and that's really the way to think about them and the way to think about Canada's support for them.

[The Chair, Liberal, Joël Lightbound]

As Madame Mainville pointed out, you have a trustless asset that doesn't require a third party.

That's much appreciated.

I will let you go, Mr. Bennett—quickly, though.