This article is supposed to be about Blockchain in Canada, an overview of our ecosystem to inaugurate CryptoNews Canada’s editorial offering. However, as I write this, the crypto exchange FTX is imploding, with 28 billion dollars lost. FTX is only the most recent catastrophe in a space that has repeatedly broken records for the largest hacks, frauds, and outright thefts in history, notably including Canada’s own $857 million Quadriga scam. With this backdrop, perhaps a better topic would be “How do we keep this kind of thing out of our ecosystem?”
FTX, like Quadriga, like Terra/Luna, like Onecoin before it, turned out to be an elaborate Ponzi scheme. This is actually unsurprising. Innovative value is created as the product of effort and risk. When the effort is low, the risk must be high, so when Tom Brady shows up in splashy TV spots to get you in on what seems like easy money, it’s probably time to get out. The question is, what should be done about this, both here in Canada and globally?
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The smart answer has to be smart regulation. We can’t just ban crypto. China, Russia, and other authoritarian states have already tried that and failed, with far more coercive power than any democratic nation can bring to bear. What blockchain – real blockchain, as opposed to frothy speculation vehicles – really does is provide trust-as-a-service. This disintermediates the monopoly transaction rails that global finance relies on today, a two and a half trillion dollar market – and that’s before the new applications that such accessible, distributed trust enables. People see the potential, and one way or another they will realize it. Crisis is opportunity on the tail of a dragon, and our governments and oversight bodies should take advantage of the FTX debacle to put in smart, well-enforced rules that will weed out the fly-by-night get-rich-quick fraudsters. This will in turn help those who are putting in the risk and the effort to realize the value of this incredible technology. The Ontario Security Commission’s Launchpad, the Canada Revenue Agency’s classification of crypto as a commodity, and the Retail Payment Activities Act, which puts the Bank of Canada in charge of payment service providers who aren’t otherwise covered, are all positive examples of the Canadian government stepping up to provide smart regulation.
Another fact that should be unsurprising is that Canada is actually the global leader in the blockchain space. With abundant energy, our skilled workforce, our cold climate, Canada is one of the best places in the world to build data centres, and crypto mining is an easy step from conventional mining, one of our strong suits. From this foundation, we have taken early leadership in blockchain innovation as well. Canadian companies deployed the first Bitcoin ATM, and created Cosmos. Ethereum was first envisioned by Vitalik at Waterloo, and Cryptokitties, the first real NFT Dapp, was built by our own Dapper Labs. Toronto Metropolitan University’s Cybersecurity Research Lab is a global research leader in the space, as is the University of Toronto’s Department of Computer Science Innovation Lab. George Brown College offered the first post-graduate blockchain certificate program on the planet. Creative Destruction Lab, Ontario’s MaRS incubator, Montreal’s Blockchain Lab and many more Canadian tech accelerators have specialist blockchain streams, and venture capital is flocking to find the next big thing. Groups like the Canadian Blockchain Consortium, Bitcoin Bay, DeFi Toronto and Untraceable pull all these elements into a high-powered package of education, innovation, and investment.
For perhaps the first time ever, Silicon Valley has found itself with serious competition in building out what is becoming the most important new technology since the microchip itself. This is also unsurprising. Canada has a long history of early tech leadership, in fields from medicine to aerospace to telecom. Even the high voltage transmission lines that power our civilization are a Canadian innovation, developed in Quebec to link its vast hydro resources to the rest of the continent.
All that said, the Canadian government must step up, not only with smart regulation but with smart support to reinforce our lead in this nascent field, or another unsurprising development will be the loss of that lead, and the collective reward it offers us. It is a fact of life that Canadian innovators are forced to look south for the risk appetite required to support our efforts. This is perhaps due to the historical influence of the highly (and appropriately) conservative Canadian banking sector, but there is more than this to our nation. We are also very comfortable with the high risk, high return environment of the resources industry, comfortable with big vision, long term projects like railways, power grids and telecom networks. It’s up to our government to provide the smart regulatory framework, and the smart innovation support, that will see us all share the rewards of the risk and effort we invest in our digital frontier.