For years after Bitcoin’s initial release into the world, it remained a highly niche project.
After a decade of roller-coaster growth, however, Bitcoin’s cult-following has turned into a global mass and spurred an entire ecosystem: myriad alternate coins, blockchains, and related products, services, and ideas.
Canadians are more curious than ever about crypto—especially fintechs, some of whom are based entirely in and around bitcoin or blockchain technology, such as Mash or Parvis. Others like Montreal’s Dello and Ottawa’s Shopify are also advancing crypto adoption in their own ways.
And according to Vancouver GRC SaaS company Diligent, 95% of boards are actively seeking knowledge on the benefits and risks of blockchain-based digital assets like cryptocurrency and non-fungible tokens.
This is all to say a lot has happened recently in the crypto realm, from innovation and opportunity to downturn and even disaster.
Fintech.ca breaks down some of the season’s most relevant revelations.
Stake or Sizzle?
One of the current controversies in today’s crypto market is that of “staking,” akin to leaving your assets with a company who holds or invests it and offers a dividend-like yield in return.
“Staking is offering digital assets like crypto as collateral to validate transactions on a blockchain,” explains Toronto-based Wealthsimple. “In return for taking on the risk of staking, participants are rewarded with coins and tokens.”
Founded in 2014, Wealthsimple this year became among the first in Canada to offer legal crypto staking.
Bitbuy Technologies is another example.
The Toronto-born subsidiary of Canadian crypto firm WonderFi Technologies—which recently acquired Coinberry and Blockchain Foundry—says Bitbuy Staking will allow users to leverage crypto balances to earn crypto rewards through on-chain staking.
However, some bitcoin purists insist holders possess their own coins on private wallets. The idea is that if coins are on an exchange or custodian, they can be permanently lost—examples of this range of the years-old Mt. Gox fiasco to the more recent FTX scandal.
Staking is a newer aspect of crypto and the risk-to-reward benefit will vary with each coin and each company.
Investing or Gambling?
FTX, the hedge fund Alameda Research, and dozens of other affiliated companies filed a bankruptcy petition in November. The news sent shockwaves throughout the crypto world.
Elevated to a high pedestal under the guise of “Effective Altruism,” a con-man known as “SBF” screwed over millions of innocent people and also severely tarnished then reputation of cryptocurrency exchanges—and the people who run them.
In response to the global financial fiasco, the Canadian Securities Administrators warned investors that trading in crypto assets comes “with elevated levels of risk that may not be suitable for many investors, in particular retail investors.”
Generally speaking, CSA notes, the “value and liquidity of crypto assets are highly volatile.”
The council of the securities regulators of provinces and territories—which harmonizes regulation for Canadian capital markets—also warns that, in addition to the volatility factor, there are unregistered crypto asset trading platforms accessible by Canadians where safeguards that protect investors’ assets from loss and theft may not be in place.
“Crypto asset trading platforms that operate in Canada and trade securities or derivatives are required to comply with Canadian securities law requirements, including registering with securities regulators,” CSA explains. “This regulatory oversight plays an important role in investor protection.”
Chasing moonshots with meme coins is likely closer to gambling than investing. A more sensible approach is dollar cost averaging, as suggested by Toronto fintech Beaver Bitcoin.
Here’s how Fintech.ca suggests protecting your assets.
Unblocking the Chain
Canada has a rare opportunity to be a blockchain leader on the world stage, posits Brian Lock.
“Done correctly, Canada has an opportunity to lean into this emerging technology and become a global innovation, jobs and value creation leader,” writes the chief financial officer of Wellfield Technologies, which earlier this year acquired Israel-based Coinmama.
At its core, blockchain is “a new financial foundation for the world,” he says. “It is wholly different infrastructure that has the power to drastically alter legacy ecosystems making all transactions faster, cheaper and safer for users.”
According to Lock, Blockchain technology for the financial world is “akin to the radical transformation that Netflix brought to entertainment.”
“Blockchain is finance’s ‘streaming moment,'” he says. “This technology has the potential to disrupt a multi-trillion-dollar global financial services market.”
However, he warns Canada may fall short of its potential because the country’s financial ecosystem is “controlled by a handful of institutions that aren’t motivated to take risks and compete.”
The risk is lower than perceived because blockchain is a technology that could solve problems outdated incumbents face, Lock suggests.
“Blockchain technology can vastly improve efficiency, transparency, and costs,” he writes. “We should place a premium on ideas that serve Canadians rather than protecting established norms.”