Ethan Lou: Ottawa is missing a big opportunity by presenting crypto as a threat

Much of Canada’s potential to become a crypto leader has already been wasted

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In the April federal budget, a single page committed Ottawa to reviewing cryptocurrencies, given the “challenges” they present and how they are sometimes “used to evade global sanctions and fund illegal activities.” “.

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It was a framing of the sector which contrasts sharply with the American approach. President Joe Biden’s executive order in March covered much of the same ground, but it also talked about “harnessing the potential benefits of digital assets and their underlying technology.”

The Liberal government only saw the threat, not the opportunity. That’s a bit myopic, given Canada’s oversized presence in the growth zone.

Everyone knows that Canadians arguably founded the two biggest cornerstones of the industry: the Ethereum network and the Binance exchange. But much of Canada’s potential to become a leader in space has already been wasted. Ethereum and Binance, both of which sought friendlier jurisdiction, no longer have much to do with this country.

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The contrast between the approaches of the Liberal government and the Biden administration is even starker when you consider that a better political path has been staring us in the face from the start.

In the same April budget, the government announced a $15 billion growth fund and a yet to be defined agency for innovation and investment. While we can debate the need for these activities given the existence of similar programs with questionable results, they clearly show that the government views the growth of the tech sector as important.

It’s the kind of carrot that should go with the stick of regulation. (As Gus Fring said in breaking Bad“I don’t believe that fear is an effective motivator.”)

Another option would be to draw on the government’s Broadcasting and Telecommunications Legislative Review strategies. There, the government is essentially adapting decades-old broadcast rules to new internet companies, in part to prevent the erosion of the domestic creative industry in the face of American domination.

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The tastes of Netflix Inc. and Binance are quite similar, after all, in that they are borderless, providing services that are largely digital. The government’s treatment of one could serve as a policy model for another.

For years, broadcasters in this country have had to set aside airtime for Canadian content and put the revenue into a pool to fund domestic productions. The success of these initiatives is questionable, but the creative industries have largely welcomed them, and in 2020 the Liberal government introduced legislation to apply these principles to global giants such as Netflix as well. For them, instead of the proportion of airtime, there are rules about “discoverability” — Canadian content must be of some importance.

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How could this translate to crypto? If an exchange’s domestic users exceed a certain threshold, it could be made to have a local office and hire local staff. And like internet companies, their crypto counterparts may have to spend a portion of their domestic profits investing in Canadian projects — crypto startups, in this case. To offset the costs of all this, crypto companies could benefit from tax breaks.

Such a program would, of course, be ideologically antithetical not just to crypto but to the whole concept of free markets. Such protectionism has its detractors even in the arts, where it is sometimes ridiculed as unnecessary and even counter-intuitive. Web giants could, for example, ditch Canada altogether, critics have said.

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Consider, however, that in the current political landscape of all sticks and no carrots, a similar departure has already occurred in crypto. In June, Binance said it would stop serving Ontario after regulators unveiled tougher rules, and that’s not the only one.

Some Canadian crypto companies have more or less welcomed this release, believing that as a result, domestic players benefit. But it’s the bigger companies saying that, as they engulf the smaller ones in a wave of consolidation. This situation is good for them, but not necessarily for the industry as a whole.

In the end, the issue isn’t specifically regulation or even the Liberal budget’s goal of scrutinizing crypto for risk. The problem is that regulation seems to be the only political tool used by the government. Crypto is always seen as a problem to be solved, not a well of potential to be tapped. And that at the risk of becoming a self-fulfilling prophecy because, as the saying goes, when your only solution is a hammer, every problem feels like a nail.

Ethan Lou is a journalist and author of Once a Bitcoin Miner: Scandal and Unrest in the Wild West of Cryptocurrency.



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