Thank you, Mr. Chair and committee members.
My name is Steve Oliver, and I am the chief compliance officer and head of Calgary for Tetra Trust Company.
First, I would like to commend the committee for dedicating time and space to undertake this important comprehensive study on blockchain technology and for inviting Tetra to contribute our views.
As a native Albertan with over 20 years' experience in the oil and gas industry, I've been delighted to have the opportunity to transition my career into this exciting and innovative space here at home.
Tetra was founded in 2019 and is Canada's first and only regulated custodian for crypto assets. As a Canadian registered trust company, Tetra has fiduciary responsibility to act in the best interests of its clients. The company meets the requirements with respect to custody of registered entities as a qualified custodian under rules NI 31-103 and NI 81-102.
Tetra was established as a special-purpose trust company incorporated under the Loan and Trust Corporations Act of Alberta. It received its licence from Alberta's Ministry of Treasury Board and Finance in 2021. Tetra is Canada-wide, with offices in Calgary and Toronto, and has a diverse board of directors with deep financial market expertise. They range from our accomplished chairwoman, who was CEO of a federally regulated trust company, to our Québécois CEO, who joined Tetra from Canada's largest bank.
This committee has heard experts speak to the merits of and use cases for digital assets and blockchain technology. Today I will add to what has already been said and speak to the manner in which digital assets and regulated entities like Tetra can responsibly coexist within our current financial system and Canada's emerging CBDC, the central bank digital currency system.
We feel it is important that this committee have a clear sense of the role that regulated custodians play in these systems. Digital asset custodians are the foundational piece of all risk mitigation strategies related to digital assets, for a very simple reason: They are the guardians of the assets. Just as they are in traditional finance, custodians act as a trusted independent third party to secure the assets of institutions and their underlying investors. The use of specialized third party custodians would have negated the occurrence of most well-known, industry-tarnishing events in cryptocurrency, such as those involving Quadriga and FTX.
As you heard from Wealthsimple in a previous committee meeting, in Canada, and indeed, globally, third party digital asset custody services are in high demand by institutional investors, corporations, regulated exchanges, digital asset miners and individuals. Despite this high demand, Canada is not yet at the stage of having a robust offering of digital asset custodians, leaving a critical void in the digital asset ecosystem. As a result, the majority of digital assets held by Canadian institutions reside outside of Canada and are held by foreign custody service providers. This means Canadian assets are at risk due to extraterritorial jurisdictional issues, and it makes regulation and oversight by Canadian officials difficult.
One very recent example is that involving a U.S. court ruling made on January 4, 2023, in which it was determined that the deposits of now bankrupt cryptocurrency lender Celsius belong to the company and not the clients for certain of the company's products. This is an incredibly important point when considering that three out of the four trading platforms most used by Canadians are headquartered outside of Canada and that only one of Canada's regulated exchanges is using a domestic custodian.
Given the level of consumer risk associated with digital asset custody, it is not enough to simply be a custodian or to have technology that enables custody of digital assets. Rather, this space requires custodians that have achieved regulated status. Regulated custodians, such as Tetra, have undergone significant levels of due diligence by regulatory bodies and are subject to continuing external oversight. Controls such as SOC 2 certification, external proof of reserve auditing, and segregation of assets must be the norm and not the exception. It is these regulatory mandated standards that can build trust within this industry and contribute to less inherent risk and higher confidence levels for all market participants.
In closing, while innovation related to blockchain technology is inevitable, it does not have to come at the cost of market stability or investor protection. Tetra was created to enable such innovation to flourish in a regulated, controlled and sustainable manner. We believe it is imperative and in the best interests of all market participants that Canadians can rely on independent, regulated and domestic custodians to navigate this new ecosystem while minimizing risk and market disruptions.
We look forward to continuing to be part of the evolution in this space and we are happy to take any questions.
Thank you.