Proceedings of the Standing Senate Committee on
Banking, Trade and Commerce
Issue 25 - Evidence - March 12, 2015
OTTAWA, Thursday, March 12, 2015
The Standing Senate Committee on Banking, Trade and Commerce met this day at 10:30 a.m. to study the use of digital currency.
Senator Irving Gerstein (Chair) in the chair.
[English]
The Chair: Good morning, and welcome to the Standing Senate Committee on Banking, Trade and Commerce. Today is our seventeenth meeting in our special study on the uses of digital currency, including the potential risks, threats and advantages of these electronic forms of exchange. To date, the committee has received presentations from a wide range of witnesses, including government agencies, digital finance experts, academics and bitcoin companies.
Today we have two sets of witnesses before the committee whose organizations have been mentioned in several meetings by other witnesses and senators.
I am pleased to welcome, from the Autorité des marchés financiers, AMF, Jean-François Fortin, Executive Director, Enforcement Branch; Christian Desjardins, Manager, Market Surveillance; and Moad Fahmi, Financial Markets Specialist, Specialized Investigation Support Unit, Enforcement Branch.
The AMF is the body mandated by the Government of Quebec to regulate the province's financial markets and provide assistance to consumers of financial products and services.
I am also pleased to welcome, from the Ontario Securities Commission, Mr. Paul Redman, Principal Economist, Strategy and Operation; and James Sinclair, General Counsel.
Similar to the AMF, the OSC is a regulatory body that administers and enforces compliance with the provisions of the Securities Act of Ontario and the Commodity Futures Act of Ontario in order to protect investors and foster fair and efficient markets.
We'll now proceed with opening statements, first hearing from Mr. Fortin, to be followed by Mr. Redman. Mr. Fortin, the floor is yours, sir.
[Translation]
Jean-François Fortin, Executive Director, Enforcement Branch, Autorité des marchés financiers: Good morning, everyone. I am pleased to be appearing before this committee. I am joined by Christian Desjardins, our manager of market surveillance, and Moad Fahmi, who is an expert on financial markets and issues related to digital currencies and their operating mechanisms. So Mr. Fahmi will be able to answer more technical questions.
The Government of Quebec has given the Autorité des marchés financiers the mandate to regulate financial markets. I want to point out that our comments today do not come from the Government of Quebec. The views we are sharing are those of the Autorité des marchés financiers.
I would like to provide a small clarification. The Autorité des marchés financiers regulates securities, but unlike other security regulators, certainly in Canada, it also has responsibilities when it comes to insurance, deposit institutions and the distribution of financial products and services.
Over the past few years, our organization has also been assigned new missions — namely the application of the Integrity in Public Contracts Act and the Money-Services Businesses Act. We will look at that in more depth later. The role we play in matters of digital currency actually comes under that legislation.
It is in that context that the growth of digital currencies and their media coverage have led us, about a year and a half ago, to adopt a position and consider the impacts and risks of digital currencies for the Quebec market. In January 2014, we created a working group in our organization to coordinate the required work, including deciding on the appropriate regulatory framework, if necessary.
The analysis of potential risks and the upcoming implementation of a digital currency ATM in Montreal prompted us to warn consumers. You probably know that, in January 2014, our organization issued a warning to consumers concerning digital currencies. We recommended that Quebecers be careful when dealing with digital currencies, which can expose them to potential losses that would not be covered by Quebec compensation and deposit insurance regimes.
The work of the internal committee has also led us to adopt a position on the application of various pieces of legislation, the first being the Securities Act. The committee had an opportunity to hear from Mr. Greenstone on the issue. We agree with him that digital currencies cannot currently be considered to be securities, since they are not securities under the law. Moreover, they are not recognized in financial markets. To our knowledge, no security regulator in Canada or anywhere else has categorized digital currencies as securities. However, digital currencies could be part of an investment contract, which would be covered by the Securities Act. For instance, a promoter could solicit investments in digital currency in exchange for a promise, a benefit or a return. Oversight would be part of an investment contract that constitutes a security.
Under the Derivatives Act, we find that digital currencies cannot be considered to be derivatives, but the same derivative with an underlying principle of digital currency would be regulated by the Derivatives Act. There are options and future contracts on bitcoin values — in other words, derivatives. To our knowledge, there are currently no such products in Quebec.
That brings me to the application of the Money-Services Businesses Act. I should first remind you of the context in which the legislation was adopted in Quebec. The Money-Services Businesses Act stems from the Quebec government's attempt to combat tax-based economic and financial crime, including money laundering and the financing of terrorist activities. Our organization has been entrusted with the administration of that act, given the regulation of financial markets we are already involved in and our collaboration with police organizations and the Quebec revenue department. The Money-Services Businesses Act requires any individuals who provide services such as currency exchange, fund transfers, issuance and redemption of traveller's cheques, money orders or bank drafts, and cashing of cheques, or who operate an ATM for a fee, to have a license issued by the Autorité des marchés financiers. After analyzing the operation of platforms for trading digital currencies, our organization has concluded that some of them would be considered to be money services businesses. So companies that operate platforms for trading digital currencies that carry out fund transfers have to have a licence under the Money-Services Businesses Act, in the fund transfer category.
Our organization has also analyzed the operation of digital currency ATMs. Although those ATMs are different from traditional private ATMs, the inherent risks of money laundering are also present. So one objective of ATM monitoring was to identify individuals making cash deposits. The Money-Services Businesses Act applies to businesses that operate digital currency ATMs. They must also have a licence to operate in the ATM category.
Moreover, the regulation of some digital currency companies is not necessarily based on activities inherent to those currencies, but rather on the involvement of legal currencies in the transactions. Our organization welcomes the regulation of digital currency companies that consider themselves to be money services businesses. That regulation helps us ensure the integrity of the company and of any individuals who play a significant role in those companies.
The legislation also allows us to transmit or communicate information to a police force when, for example, we have reasonable grounds to believe that a criminal offence is about to be committed or has been committed. Likewise, it enables us to transmit or communicate information to the Quebec revenue agency if we have reasonable grounds to believe that tax legislation has been violated.
The regulation also makes it possible to identify companies that are operating without a licence, in which case they can be prosecuted for illegal practice. In other words, the Money-Services Businesses Act requires companies to have a licence. That ensures the integrity of people who operate in this field, and when individuals continue to operate in the field without a licence, the legislation allows us to put a stop to the illegal activities.
The Money-Services Businesses Act can therefore be a useful tool, which would likely be used to avoid fraud, money laundering and tax evasion. However, we think that various financial sector stakeholders must continue to be concerned about the issue, so that a comprehensive and effective solution can be found to regulate companies and their activities.
As I mentioned previously, we work closely with various police and tax authorities, and we also believe in the importance of collaborating with other stakeholders, including FINTRAC, which, given the risks associated with digital currencies, have a predominant role to play in this area. That collaboration should involve things like information sharing, so that all the partners would have access to the most complete and up-to-date information, as that would enable them to respond proactively.
In closing, our organization continues to follow the developments in digital currency and its regulation on the international stage. We are especially interested in the conclusions this committee will eventually reach, given your consultations and discussions. As evidenced by our presence here today, our organization is always interested in collaborating with any other federal or provincial stakeholders that would like to share their thoughts on the regulation of digital currency.
I want to thank you once again for this opportunity. My colleagues and I are available to answer your questions to the best of our ability.
[English]
Paul Redman, Principal Economist, Strategy and Operations, Ontario Securities Commission: Thank you for this opportunity to speak with you today. We appreciate the opportunity to contribute to your discussions on this complicated and evolving topic.
My name is Paul Redman. I'm the Principal Economist at the Ontario Securities Commission, or OSC. I'm joined today by Mr. Jim Sinclair, who is our General Counsel.
I should start by noting that the commission has not publicly announced any policy position or made any decisions regarding the treatment of digital currencies.
By way of background, the OSC is a provincial Crown corporation responsible for regulating the capital markets in Ontario. The OSC administers and enforces compliance with the provisions of the Ontario Securities Act, the Commodity Futures Act and certain aspects of the Business Corporations Act.
Our mandate is to provide protection to investors from unfair, improper or fraudulent practices and to foster fair and efficient capital markets and confidence in the markets. In this role we oversee the capital markets activities of more than 1,200 publicly listed issuers, 3,700 investment funds, 1,300 registered firms and 66,000 registered individuals.
In terms of bitcoin and other digital currencies, much of the attention has been on their means for paying for goods and services. The OSC does not have jurisdiction over digital currencies as such and so the OSC's engagement on this issue has been limited to date.
That being said, bitcoin has been the focus of considerable attention given its growing use and notable price volatility. As a result, it may see growing interest in its development as an investable asset class. Packaging digital currencies into investment schemes or products would lead to the regulation of that investment to the extent that it is deemed to be a security or a derivative.
With this in mind, the OSC published in April of last year an Investor News bulletin on the potential risks associated with virtual or digital currencies. While we have not yet seen digital currencies packaged as investments, this release highlighted that virtual currencies have not been subject to traditional financial sector regulation. We also noted the various risks associated with virtual currencies and the need for investors to do their own research.
This bulletin was consistent with those published by our colleagues at the AMF and also with other organizations such as the U.S. Securities Exchange Commission and the North American Securities Administrators Association.
Beyond drawing the attention of investors to the potential drawbacks of virtual currencies, we have seen a number of limited instances where digital currencies and capital markets have intersected. There are some public companies that are engaged in bitcoin-related businesses, such as running exchanges, owning ATMs, developing software for bitcoin payment systems or even running bitcoin mining operations. The regulatory expectations of these firms are the same as for any other public company. In particular, we expect that they provide full disclosure to their investors of the material risks associated with their businesses.
While the majority of digital currency-related market innovations and growth have taken place outside of Canada, we fully recognize the potential for bitcoin and other digital currencies to impact Canadians, and by extension the OSC's work in Ontario. We are actively monitoring this space and are focused on keeping pace with developments to ensure we are prepared to respond to bitcoin-related security products as they develop.
If I can, I would like to conclude by commending this committee for taking such a thoughtful and consultative approach to this complicated and evolving issue. We would be happy to offer our thoughts in response to any questions the committee members may have. Thank you very much.
The Chair: Thank you very much, Mr. Redman.
Mr. Fortin, if I may start. Did I understand you to say that you were looking at regulatory framework if necessary, but that it hadn't been decided yet? Did you use the words "if necessary," or has it been concluded that there will be a regulatory framework?
Mr. Fortin: You mean for securities?
The Chair: For the digital currency.
[Translation]
Mr. Fortin: No, what we are saying is that digital currencies, including bitcoins, are currently unregulated. It is something of a no man's land. We welcome the possibility of regulation and oversight. What should that regulation and oversight consist of? We don't think it is up to us to provide direct input on that. Concerning the regulation of securities, as I was saying, our conclusion is that digital currencies are not yet securities, so they are not covered by the legislation we enforce. Of course, if we can contribute to the discussion — and that is sort of what we are doing today — but also with other organizations, we think that having regulations is preferable to not having them. What should those regulations consist of and how could we ensure they are being properly enforced? I think that would be a good thing, but discussions should continue, so that this area can ultimately be regulated.
[English]
The Chair: Did I understand you to say that you are at this point going to issue a permit for ATM machines, that you will require a permit? Would an exchange also require a permit at this time, or is that a separate issue?
[Translation]
Mr. Fortin: That may be a separate issue, and perhaps my colleague could supplement my answer. The term "exchange" is used for transactions in bitcoins or digital currencies. If that exchange negotiates digital currencies, which are not securities, it would be beyond the jurisdiction of the Autorité des marchés financiers. It would not be a security, so an authority licence would not be required to proceed. In fact, when it comes to oversight in terms of securities, if the objects negotiated in the exchange are securities — as is the case at the exchanges we are familiar with — then oversight would have to be provided. One does currently exist, and the required permits must be issued. Perhaps Mr. Fahmi could complete my answer.
Moad Fahmi, Financial Markets Specialist, Specialized Investigation Support Unit, Enforcement Branch, Autorité des marchés financiers: Under the Securities Act, what Jean-François is saying is absolutely true, and under the Money-Services Businesses Act, if operators of platforms for trading digital currencies transfer money directly from one person to another in transactions, that meets our definition of fund transfers under the Money-Services Businesses Act. They then have registration obligations, record-keeping obligations and other obligations set out in the legislation.
Senator Bellemare: I wanted to get a better understanding of what Mr. Fahmi was just explaining. There are regulations under the Money-Services Businesses Act. You have established an obligation concerning ATMs where bitcoins can be exchanged.
You said you had regulations to determine who is depositing cash into those machines. I would like you to briefly explain how that registration works. Does it mean that anyone who deposits Canadian dollars into the machine must be identified? Do you think that can help prevent illegal activities?
Here is my second question. If the idea was to regulate the transfer of bitcoin funds, did you draw upon the New York regulations?
Christian Desjardins, Manager, Market Surveillance, Enforcement Branch, Autorité des marchés financiers: I could give you an answer about ATM regulations. What we are concerned about is the integrity of those who deposit money in the machine. We know that, in order to buy digital currency, according to the business model, people can simply deposit cash into the ATM to acquire digital currency. Then, at the end of the day, someone behind the ATM takes that money out. So the Money-Services Businesses Act aims to regulate the integrity of those individuals.
As for the licence request, we are asking companies to first disclose information related to the company: its legal structure, the financial institutions it does business with, a list of its managers, administrators and owners, and a list of employees who make deposits or directly operate the ATM in question. We then use that information to have police forces establish a security clearance report. We send the information to Sûreté du Québec, to local police forces. Within 30 days, the SQ in particular provides us with a security clearance report — criminal records and so on. The police force will recommend whether we should issue or deny a licence. Although the AMF ultimately decides whether to issue a licence, we base our decision on the security clearance report provided by Sûreté du Québec. That is done for the company, but also for all the managers, administrators and employees who can work behind the ATM.
Senator Bellemare: However, you do not have any information on the individuals who buy bitcoins using cash and who make ATM deposits as consumers or clients.
Mr. Desjardins: As Mr. Fahmi said earlier, the company that operates the ATM has to keep records and registries, including a registry of all the transactions, which lists the transactions made, as well as the time, date and the nature of the transaction. It may then be possible to track them through user codes.
However, client identification obligations do exist under the Money-Services Businesses Act, but they do not apply to ATMs because, in a context prescribed by the legislation where money is simply withdrawn from a private ATM, there may be no need to identify that clientele directly. Moreover, as previously mentioned, fund transfer businesses have an obligation to identify clients. It may indeed be a bit more difficult to identify clients at an ATM.
In any case, I simply want to point out that the objective of the Money-Services Businesses Act is to prevent and fight money laundering. It was put in place particularly to allow us to verify the integrity of people who administer and operate automatic tellers, in compliance with the law's objective.
Senator Bellemare: So, it cannot prevent someone who wants to launder money from depositing it in the automatic teller and purchasing bitcoins.
Mr. Fortin: To complete Mr. Desjardins' answer on the link with money laundering, once a business has been registered — and I am not necessarily referring to automatic tellers alone, but to all of the businesses that are registered with us and offer money services — we have the power to inspect, and we can validate the books and records and the transactions that are done. There are transaction thresholds, comparable to FINTRAC's, where depending on the amounts of money involved we have to collect information and obtain the person's identity.
We also issue permits, register businesses and validate bookkeeping and records, but there are potential offences, such as fraud and money laundering, that do not fall under our purview. This has not happened up till now, but should it happen in the context of a verification or inspection, and if there were indications of potential money laundering, we would refer the file to police services. As you know, money laundering is a Criminal Code offence, and the police have the power to investigate in those cases.
So, in a case like that, we would refer the file to the police who would conduct a criminal investigation.
Senator Bellemare: How many ATMs are there in Quebec at this time?
Mr. Desjardins: We have counted a few more than twenty. Things are developing quite rapidly. Just over the past two weeks, we learned of the existence of three new automatic tellers. Things got off to a slow start. As Mr. Fortin mentioned earlier, when we issued our advisory notice on February 5, 2014, to our knowledge, the first digital currency automatic teller was installed on that day in Montreal on Saint-Laurent Boulevard. Since that time, about 20 automatic tellers have appeared. Some are grouped together and operated by the same business, but they are sprouting up everywhere.
Senator Massicotte: I thank all four of you for being here with us. I am going to continue in the same vein, since we are trying to gain a better understanding of your regulation in Quebec. I think that we understand the issue of the automatic tellers well, because you have described it well. As for the other transactions, if they do not involve securities, you are very clear.
Just to be clear, the person who goes to the corner store and uses virtual currency, bitcoin, is excluded; there is no obligation to provide information. I would like to understand what type of business, aside from someone who operates an automatic teller, may have to apply for a financial probity certificate from AMF.
Earlier, you answered the chair's question concerning stock exchanges by saying that if transactions involved securities, then information does have to be provided; if not, then no. If a business opens up and almost wants to act like a money services company, does it have to apply? What other types of operations have to comply with the permit obligation?
Mr. Fortin: The only other money services businesses that do virtual currency transfers and could be described as money services businesses subject to the law are those that do what we call funds transfers. The best example, and once again I will ask my colleagues to explain this better, in case I am not clear, is PayPal. You do transfers with PayPal, for instance with Canadian money. If you convert that money into bitcoins, there will be a funds transfer platform. You register with that platform. If I am the buyer, I pay with Canadian money, I deposit Canadian money using that platform. The seller has bitcoins to sell to me; Canadian money is credited to his account using the same platform. The transaction reproduces the PayPal model. PayPal does have a permit from the Financial Markets Authority under the Money-Services Businesses Act in order to conduct its activities. In this case the goods that are purchased are digital currency, bitcoin, and there is a funds transfer. In that case, given existing guidelines, a permit would have to be issued to the money services business in light of the funds transfers.
Senator Massicotte: I would have described that as an exchange. The chair used that term earlier, and the reply was no, that the requirement did not apply. But in the case you mentioned, it does apply. In fact, it is a platform that exchanges Canadian dollars for bitcoins.
Mr. Fortin: Once again, what we regulate — and the nuance is very important — are "money services businesses."
Senator Massicotte: That is correct.
Mr. Fortin: We do not regulate digital currency.
Senator Massicotte: Not the currency as such.
Mr. Fortin: Exactly. What it means in Quebec to have a money services business permit — and we admit that this is relatively limited — is that the business has been investigated and that its integrity and that of the people involved in its operation has been established with the Sûreté du Québec. Then there are obligations regarding bookkeeping and records.
You asked whether it was a stock exchange. We use the term "bourse" or exchange, but it is not an exchange in the sense of a securities exchange.
Senator Massicotte: I agree entirely. You referred to FINTRAC and other bodies at the federal level. There is also an obligation, for those who are registered, to keep records and know their clients. You do not get involved in that. Your only involvement concerns the financial probity certificate.
Mr. Fortin: Yes.
Senator Massicotte: That is the only thing you require from those people. There is no federal obligation regarding money laundering, for instance. Am I mistaken?
Mr. Desjardins: Perhaps I should make a distinction. I said earlier that there is no procedure to verify the identity of the client in the case of automatic tellers. However, regarding the funds platform, as in the example Jean-François just gave using PayPal, there is an obligation to check the client's identity. When the transaction takes place, when a business does a funds transfer, it has to obtain the name, address and telephone number of the client. To go into more detail, in the case of transfers of more than $1,000, additional identity verification is required. For money services businesses that do face-to-face transactions with clients, the client's identity is established through an identity card with a photograph. However, for a virtual business, such as in the world of virtual currency, the verification is done through the validation of a bank account or of a current bank transaction. For any money services business that does virtual currency funds transfers, there has to have been a cash deposit in a bank account. In that way, identity can easily be checked or tracked to the client's bank account.
Senator Massicotte: You are talking about Quebec regulation and not FINTRAC.
Mr. Desjardins: Correct.
Senator Massicotte: It is different in Quebec.
Mr. Desjardins: Yes.
Senator Massicotte: My colleague asked a question that did not receive a reply. Are you aware of the regulations being proposed in New York? There are two or three draft regulation projects; one was tabled in December 2014 and we are awaiting the final version. Are you aware of what is being proposed in New York?
Mr. Fahmi: I am aware of it to some extent. I do not know the regulation in detail, but they seem to want to put in place a specific regime for virtual currency where exchanges would be registered somewhat like stock exchanges.
That is not at all the AMF's position at this time. The position of the AMF concerns the way in which our current legislation is interpreted regarding virtual currencies. That is the work we have done. The Americans want to put in place a whole new regime that would register the exchanges, from what I understand.
Senator Massicotte: The regulation and the acts are different. However, I would argue that these measures are quite close to yours in terms of results. The Americans want to monitor what is known as the "on ramp/off ramp" concept, that is the moment when the American currency, in this case, is converted, and the off ramp, using the information.
The FINTRAC regulation and yours, with the notion of integrity, monitoring the transfer point, leads almost to the same conclusion. We are talking about different regulations and different authorities, but we may arrive at the same point.
Mr. Fahmi: That is true. However, our interest was limited to the framework of the Money-Services Businesses Act, whose objective is to fight money laundering.
Senator Massicotte: I understand that your authority is different.
Mr. Fahmi: They have multiple objectives. These include preventing money laundering, but also the creation of a stable financial system for virtual currencies, by obliging these exchanges to abide by certain solvency criteria, certain criteria requiring transaction counterparts and clearing, somewhat like the Securities Act requires that exchanges have all of these features which ensure that the system is stable. The Americans will prevent money laundering, but they are also going to work on protecting consumers by creating a stable financial system.
These are roles that have been given to us regarding securities, but not virtual currencies. For virtual currencies, our protection role consists in fighting money laundering and terrorist activities only.
Senator Massicotte: My next question is broader. All of the provinces and states propose regulations and laws every day. As you know, the bitcoin is almost an international currency. It is neither Canadian, nor American, nor European. Even if the regulation you are proposing is adopted, and it is a challenge for all countries, what about the individual who is doing transactions on the New York or European or other provincial stock exchanges? What regulation will apply? If he deals with a Quebecer, will your regulation apply automatically? What do you do in a case like that? What discipline or authority will you have to regulate that market, where transactions will take place in virtual space, so to speak?
Mr. Fortin: Once again, as to what regulation should apply, we can look to securities for examples. The Canadian market, as we speak, has a regulatory authority in each province, and we intervene according to our jurisdictions. The Autorité des marchés financiers is the competent authority in Quebec. The question you raise, senator, applies to securities as well. Today, from Montreal or from here, you may do transactions on stock exchanges everywhere in the world. There is a growing risk of fraud, and an increasing number of them are taking place. Now, once fraud has occurred, funds may be transferred from one jurisdiction to another. What this means is that the regulators and the countries have to collaborate, and that is done for securities. There is vast cooperation both in Canada, among the various Canadian regulatory authorities, and internationally, particularly with the SEC in the United States.
We can ask ourselves again today what the regulation would be. In an ideal world, regulation would be similar from one country to the next, which is the case regarding securities. With a few differences, generally speaking, in sophisticated financial markets, securities regulations are very similar. This would be in a context where we could cooperate with the local authorities of each of the countries in question in order to intervene if need be. Everyone is responsible for regulation on their own territory.
[English]
Senator Black: Thank you very much, gentlemen. This is very helpful. In respect to the regulation of the money services business in Quebec, we have heard testimony throughout from people who are involved in the industry that they want some level of regulation because they believe it assists their business development. Have you had any of that feedback from the organizations that you are now regulating or not?
[Translation]
Mr. Fortin: You are referring to comments on regulation, or on how it can be positive or negative for them?
[English]
Senator Black: Both, but the first question would be what are people saying about the steps that you have taken? Are they happy about that? Are they unhappy about that? Are they asking for more or for less?
[Translation]
Mr. Fortin: I have no specific answer regarding comments we may have received. Once again, it is important to remember that the framework of the Money-Services Businesses Act existed before the very recent arrival of virtual currencies. When we say that the Money-Services Businesses Act applies in some regards to virtual currencies, we do not regulate virtual currencies as such. The nuance is important.
In the notices we published, we reminded the businesses in question that when we say, for instance, that a given automatic teller has a permit, we are not saying that they have obtained the approval of the authority regarding virtual currency. In that context, I did not receive any comments on regulation. I have the impression — this is a very personal comment and the matter has not been verified — that the value of the currency is based on the confidence investors and consumers have in the product, since that confidence is the foundation of the stability of financial markets. I think it is good for them to receive some type of recognition from regulators showing that their products comply with regulation, if there is regulation.
In that sense — and again, this has not been verified, and I read the testimony that was given before this committee — I believe that the people in this industry would like to see a certain framework that would allow them to say that they are complying with regulation.
By the same token, I think that one of the characteristics of virtual currencies is that they constitute a decentralized currency that does not come from a central bank which would have the framework and safeguards a central bank can provide. That is why it can become complicated to apply good regulation.
I may not have answered your question directly, senator. We have not really received any comments, but that was my personal impression of what this might represent.
Mr. Desjardins: I might add, as Mr. Fortin was saying, that we have not received any comments on the positive or negative value of the application of our Money-Services Businesses Act to these firms. However, we have perceived a certain reaction from the industry. People from the industry contacted us to clarify how the act would apply to their business. We were able to reply to their questions quickly. We did perceive a reaction, but I am not well placed to interpret it.
[English]
Senator Black: Thank you very much. Mr. Redman, you indicated near the end of your testimony that you were monitoring the development of virtual currency, taking no positions now, but you are monitoring. I'd like to ask you as to what you see today and what do you think you're going to see going forward based on the trends as you assess them?
Mr. Redman: As I indicated, what we have seen in Canada has been fairly limited to date, but part of what we've done internally within the OSC is to set up a group much like the AMF has that coordinates things within the OSC. One of the topics we cover is bitcoin. We see, casting a glance over the global markets, that there are people developing platforms for trading derivatives based on bitcoin, for example. There are a couple in the U.S. I think there's one right now seeking CFDC approval to open an options exchange.
Other than that — and this has been noted in prior testimony — there are some applications before the SEC to create exchange-traded funds based on bitcoin, and globally there are a number of hedge funds that have developed strategies around investing in bitcoin. My personal view of what we might see going forward is I think if bitcoin regains some of its value and some of the lustre it's lost the last year or so, you might expect to see more interest in people investing in that and trying to benefit from that, which would drive more interest in the fund.
Senator Black: Mr. Redman, move if you can — this is helpful — beyond considering bitcoin. Think virtual currency; think broader picture.
Mr. Redman: It's very hard to predict what might happen or even opine on it as an economist. You don't want to necessarily rely on my predictions for the future. Jim and I were talking about this earlier, the technology behind bitcoin as a currency perhaps is where we might actually see things in the future; again, just my personal view, but the whole Blockchain, the idea that this is a methodology for transferring the ownership of an asset virtually, it will be interesting to see how that develops in years to come.
Senator Black: Very helpful and very consistent with what we have heard today.
[Translation]
Senator Maltais: Welcome, gentlemen. All of this is very interesting. We do not often have the opportunity of welcoming people from the Quebec financial area to this committee. I want to welcome you.
First, I would like to congratulate you on the work you do at the AMF. In particular, you set insurance back on the straight and narrow path. However, several people have questioned us on certain small deficiencies that still need to be corrected. I will leave the matter of the bitcoin to the other senators; I have talked about this enough and I would like to move on to something else.
I would like to pass on some questions that people have asked me to put to you. The first one concerns financial planners. All of the banks encourage us to consult their financial planners. Are those planners accredited by the AMF?
Mr. Fortin: Yes.
Senator Maltais: And are the agents who offer insurance in banks also accredited by the AMF?
Mr. Fortin: Yes.
Senator Maltais: One last question. You said in the beginning that those who exchange bitcoins are not covered by deposit insurance. Is that true?
Mr. Fortin: Yes it is.
Senator Maltais: If the chair had listened to you, the bitcoin he purchased for $100 would still be worth $100 today, whereas it is only worth $30 now. The warning you issued to the population is quite accurate, because all of this belongs to the virtual world. People, young people in particular, are very attracted to the virtual world. I read the advisory notice you published in the newspapers — I hope you were quoted correctly — and it was very helpful.
The other point I would like to address is your offer to collaborate with an institute — whether federal or provincial, in Ontario or Quebec — to develop effective regulation so as to prevent Canadians from incurring losses, especially in the commercial area. We are talking about rich people, like my colleague across the way, who incur losses, and we are trying to devise regulation in this committee. We are trying to examine all of that, and we need good advice like the advice you can provide.
I invite you, if you continue your reflection on this, to send it on to us. It will be useful for all of Canada.
Mr. Fortin: May I make a comment?
[English]
The Chair: You may. You're here to talk about digital currency.
[Translation]
Mr. Fortin: In fact, I simply want to thank you for your comments and your support, which are much appreciated. However, I would also like to emphasize the warning we issued and the risks associated with virtual currency and bitcoin transactions. That is the very core of the message we wanted to send when we published our notice in February 2014. At that time, because Mr. Fahmi and Mr. Desjardins' team monitor new financial products, we were able to rapidly identify the risks involved in the use of bitcoins. And this was despite the fact that at that time we had not yet completed our analysis as to whether or not we had a role to play as regulators, as we do with securities, and whether we had a role to play in connection with our regulation of money services businesses. In any case, we felt the need to rapidly warn the population about the risks involved in the use of bitcoins and virtual currencies. That is why we wanted to warn people about the risks they were running if they made transactions using that currency, since our compensation fund does not apply to them.
Another point I would like to raise is that organizations have questions too, because this is a complicated area. The regulation is not yet in place, but it is important to educate the population, at least insofar as the risks involved are concerned.
This reality exists, to our mind, regarding securities as well. People have to make sure that they know the people they are dealing with well, whether they are financial planners, or other people who offer them financial products and services. They should make sure that these people are registered with the AMF or with the OSC, the Ontario Securities Commission, if they are in Ontario, and that the products that are offered are good products. There is no regulation in this area and there are a lot of risks; so it is important that the population be aware of that.
Senator Maltais: Thank you very much.
Senator Ringuette: If I understood correctly, both the AMF and the OSC are opposed to including virtual currency, be it bitcoin or other such currency, in the definition of security. Is that correct?
Mr. Fortin: We are not opposed to including virtual currency in the definition of security. What we are saying — and Paul, correct me if I am wrong — is that when you examine virtual currency in the context of the Securities Act and the Derivatives Act, it does not constitute a security within the meaning of those acts. I believe that's also what Mr. Greenstone told the committee a few weeks ago.
[English]
James Sinclair, General Counsel, General Counsel's Office, Ontario Securities Commission: In Ontario, we take a very similar view. We have a fairly extensive definition of "security." It has been flexible and expanded in its interpretation over the years to apply to new and different investment products.
As we currently understand virtual currencies, they wouldn't be swept into that definition, but as my colleagues at the AMF have indicated, and as Mr. Redman has indicated, it's not out of the realm of the possible that they end being structured in such a way as to fall within the definition. And we are seeing that in other parts of the world where they are being used in investment-like ways. That's where it would fall likely within the definition of "security."
That's why we have our internal group looking at this from a securities perspective, and I would presume that it's the same reason in Quebec that the AMF is doing that: they have the money business aspect as well, which we don't have.
[Translation]
Mr. Fortin: I'd like to add something to my answer, if I may.
As I said in my opening remarks, in some respects, it could be covered by an investment contract, which is considered a security. It would be just like any other area. In a situation where people were looking for investors to fund bitcoin-related activities, such as mining, they would be seeking an investment from an investor, and that would be considered an investment contract and, therefore, a security. In that case, we would be involved, in terms of regulating that investment. Again, we would not be regulating the digital currency but, rather, the investment contract and the security.
Senator Ringuette: I understand perfectly. Before we can say that we need a regime to regulate digital currency, we have to define its characteristics and determine who the regulating authority should be. If, in Canada, we ultimately decide that digital currency is money, the federal government will have to regulate the area since it falls within federal jurisdiction.
Mr. Fortin: Precisely.
Senator Ringuette: If, however, bitcoin ends up being defined as a security because of its characteristics, it will not be up to the federal government to regulate the area but, instead, each of your provincial authorities.
We've now had 17 or 18 meetings on this topic, and I am still unsure as to which category bitcoin should go in. And yet you are asking us to see to its regulation. Could you kindly elaborate on that?
Mr. Fahmi: It underscores the importance of cooperation between the various agencies because digital currency poses a number of risks, in terms of markets, consumers and the financial system as a whole. So protecting consumers is important, and authorities exist for that purpose, including the AMF and the Office de la protection du consommateur and, to a certain extent, the various deposit insurance systems.
When it comes to protecting the financial system from risks, central banks — the Bank of Canada — and financial institution oversight agencies — the Office of the Superintendent of Financial Institutions — come into the picture. Deposit insurance mechanisms also have a role to play in this regard. Ensuring protection against money laundering and terrorist financing activities is the domain of FINTRAC, the Money-Services Businesses Act and police.
Depending on the risks involved and the institutions' various mandates, one option would be for the organizations to work together in order to mitigate the risks and limit the negative impact stemming from certain digital currency features.
Otherwise, it would be possible to establish a whole regulatory system. New York, for instance, decided to go that route. I think that would fall outside the AMF's scope; it would fall on lawmakers and we would adapt accordingly.
[English]
Mr. Sinclair: You might not really need to decide whether it is one or the other because it strikes me that it could be both. It's a mechanism for the exchange of value, so it potentially falls within the world of currency, but it's somewhat unique in the way it can also be structured to potentially be a derivative or investment where traditional securities regulation might come into play.
That's presumably one of the challenges the committee has is that in some respects it could have the potential to be in both camps, and how do you deal with that when it's something new and different where regulatory regimes haven't been designed to deal with this kind of thing?
That's why our two respective organizations are looking at it quite closely because it is something that is evolving. While we have a consumer protection and investor protection role to play, we have to exercise that role appropriately within the confines of the legislation to which we're subject.
Senator Ringuette: Well, I thank you for your comments because at the end of the day it may very well be that the recommendation would be for the federal government, along with its provincial counterparts, to have a special working group in order that whatever federal legislation is needed in regard to money meshes well with whatever legislation the provinces need in regard to consumer protection and commodity markets.
Senator Tannas: This has been a terrific discussion. I want to make sure I understand this, and I always seem to feel like I'm coming from behind to catch up.
If I'm running a foreign exchange business, not bitcoin, because the on- and off-ramps seem to be what everybody is focused on, making sure we get it right, that at that moment where it is being exchanged from digital currency to fiat currency that we know who is doing it, and that what happens after that becomes less certain.
So, if I am today running just a regular foreign exchange in Montreal, I'm not regulated, except that I must comply and maybe get certified by FINTRAC. Is that right?
Mr. Desjardins: You would be regulated under the Money-Services Businesses Act.
Senator Tannas: In Quebec?
Mr. Desjardins: In Quebec, correct.
[Translation]
Currency exchange services are regulated by the Money-Services Businesses Act. And, yes, a foreign exchange business must be licensed by the AMF.
[English]
Senator Tannas: Is that the same in Toronto if I'm running a foreign exchange kiosk?
Mr. Sinclair: There are regulations that might apply to running a foreign exchange kiosk. We don't have something similar to the Money-Services Businesses Act that is in Quebec, so that business wouldn't be within the confines of the Ontario Securities Commission unless it was also engaged in options or futures on currency or something like that.
Senator Tannas: For just straight foreign currency exchange, it doesn't sound like there's anybody in the provincial government looking over the shoulder of those guys.
Mr. Sinclair: I wouldn't say that. There will be consumer-type legislation that might apply. So if you've got the window at the airport that tries to sell you Canadian dollars for whatever currency you're carrying, I'm by no means an expert on this, but there will be some consumer protection laws that will apply to those businesses. They're just not falling within the ambit of the securities commission because what they're doing isn't a security or a derivative. So they're outside of what we would regulate.
Senator Tannas: I'm sorry for being thick. Why doesn't an exchange from our currency into digital currency fall under foreign exchange rules as you have it today?
[Translation]
Mr. Desjardins: One of the first things we looked at in our study was whether digital currency was a currency comparable to legal tender, and we determined that it wasn't. And that is why the exchange of digital currency to legal tender is not treated as a currency exchange; one of the two is not considered a currency.
Instead, it is treated as the purchase or sale of digital currency. So the Money-Services Businesses Act applies only in the case of a funds transfer or the operation of an automated teller machine. It does not apply from a currency exchange standpoint given that only one of the two elements is considered a currency. Those were the findings we came to in our study.
[English]
Senator Tannas: So, if the world carries on, is it possible that Montreal could become the epicentre for unregulated, on/off-ramp exchange in the world?
[Translation]
Mr. Desjardins: That's a good question. As far as the regulation of money services businesses is concerned, two approaches are possible. On the one hand, you could have businesses wanting regulation, whether in terms of conducting digital currency activities or setting up in a different jurisdiction with some sort of regulatory regime to establish some credibility. That is certainly a possibility.
On the other hand, you could have businesses trying to conceal their activities using digital currency and they would want to set up elsewhere. If the regime we've put in place appeals to businesses, we would tend to view them as wanting to be more transparent, rather than the opposite.
[English]
Senator Tannas: But the place for identity, where you've placed identity, is just on ATMs. Is that right? No? Any exchange?
Mr. Fortin: Any money services business.
Senator Tannas: So if I set up my server to do bitcoin exchange in Montreal, take Visa and provide bitcoin, I'm going to be regulated by AMF?
[Translation]
Mr. Fahmi: In reality, if you were engaged in fund transfer transactions, you would know. The only way to determine, without a doubt, that you are conducting fund transfer transactions in our jurisdiction would be to evaluate your business model. Some business models provide for direct fund transfers, and others seek to elude our definition of fund transfers.
To your question about Montreal becoming an epicentre for exchange, I would say that we aren't for or against that possibility. If, however, money services businesses are engaged in criminal activities, we would definitely want to curb those activities.
If those activities do not fall under the Money-Services Businesses Act, obviously, police would be involved given that a crime has been committed, and they would have the ability to deal with those engaged in money laundering.
FINTRAC, as well, seems to want to implement a regulatory regime. So a number of stakeholders could take action to address illegitimate activities in the digital currency sphere. We have our area of jurisdiction, and our partners have theirs.
[English]
Senator Tannas: So really, if we agree that in Canada it is vital that we participate with other countries in the on/off-ramp, we should not be looking to provincial regulations. We should be doing whatever needs to be done to strengthen FINTRAC's reach to make sure that we capture this because there could be areas in provincial legislation that would allow that. Every province is not going to be perfect in the way in which these exchanges could be regulated and overseen to make sure that we capture the on- and off-ramp. Is that fair to say?
[Translation]
Mr. Fortin: I don't know what the ideal regulatory regime would be, but certain federal authorities have the necessary jurisdiction over currency. FINTRAC also has a role to play, and it could simply be to provide complementary oversight, with the federal government being responsible for part of the regulations. FINTRAC's involvement could complement the regulatory role played by the province, as in Quebec's case, with the Money-Services Businesses Act.
Senator Hervieux-Payette: I am trying to understand the difference. We always talk about people who don't need dollars in order to purchase bitcoin because they have direct access to bitcoin. I'm trying to draw a comparison with the popular payday loan stores and I was wondering whether Quebec had more regulations governing the practice of walking into a store to borrow money at an astronomically high rate or cash a cheque.
Are Ontario and Quebec different in that regard? Could these stores become places where people go to buy bitcoin? Since I don't do any mining or sit on the computer all day, I would do what the chair did and purchase $100 worth of bitcoin only to end up with $50 worth a year later.
But if I wanted to acquire bitcoin to pay for various transactions, such as at the hairdresser or in a restaurant, just how far would your reach extend? We aren't at the point where everyone is using bitcoin, so there would obviously still be legal Canadian tender.
You have to buy, on the one hand, and sell, on the other. If, for instance, someone wants to get a new car and has a lot of bitcoin, that person will go to those types of stores. Where do you stand on the regulation of those stores, some of which could be listed on the stock exchange, represent large companies and have a number of bitcoin offices? People take them and manage both activities at the same time, such as making small loans, cashing cheques, and redeeming or exchanging bitcoin. Would you have authority over what would be issued and how the system would be structured?
Normally, if I prepare a prospectus, you see it and I have my charter, I can sell shares. It may be necessary to have a place where they can be purchased. We can talk about bitcoin all we want, but so far, we can't say we have come across many businesses that sell them.
The issue of bitcoin mining is different, because people don't have to use legal tender, but they do if they don't engage in mining. Will you intervene? Will you conduct an examination? Basically, I'm wondering how you will go about determining the value. What would it say in a prospectus? Proceed at your own risk?
Mr. Fortin: It's hard for us to envision how it would be structured. Again, it is not up to us, as regulators, to determine how it should be structured. But if a business is a reporting issuer, has a prospectus and holds a public offering, pursuant to the prospectus regulated by the AMF, the business will have to satisfy the same requirements as any other issuer in terms of regular information and public reporting. If the reported activities include the issue or transfer of bitcoin, we would regulate the securities component, the reporting issuer component. We wouldn't have any control over the business's core activity, which we assume would be bitcoin production. Bitcoin would be one of the products available.
In that situation, yes, we would have a role to play. If a bank or other reporting issuer were to start engaging in those activities tomorrow, it would have to report those commercial activities. We wouldn't play a role in terms of regulating the digital currency or bitcoin. To the question of what it should look like, once again, I would say that if such a business were to open up shop tomorrow, consumer protection organizations or other agencies might have a role to play, as Mr. Fahmi mentioned earlier. But, for us, today, it's hard to answer that question.
If the business is an issuer and the service falls under its activities as an issuer, the regulatory authority would play the same role it does with other issuers, from a securities standpoint.
Mr. Fahmi: I'd like to add to Mr. Fortin's response, if I may. Your question has two parts. First, in terms of protecting people who invest in a bitcoin-related business, you asked how the bitcoin value would be determined. I think the Canada Revenue Agency discussed the principles that would be used to determine the value, since the agency would have to do that for tax purposes and assess the value used for bitcoin. Usually, that information is easy to obtain, just as the chair is able to determine the value of the bitcoin he purchased.
Second, as far as risks are concerned, like any other reporting issuer, the business would have to properly assess and report the risks associated with its business model. Clearly, there would be liquidity and market risks, as well as other known risks associated with digital currency. And the business would certainly have to disclose that in its prospectus.
With respect to consumer protection, I believe Quebec's Office de la protection du consommateur already monitors the payday loan companies you mentioned. Perhaps the consumer protection office could play a role and eventually us, as well, if our currency exchange definition were broadened. This is where your question ties into Senator Tannas's question about a direct exchange from our currency into digital currency and whether that digital currency would, today, be considered a currency. The answer is no, but perhaps in the future, our definition might be broadened to include digital currency if it were to be widely used or if the central banks were to designate it a currency. Right now, however, we don't have the legislative or regulatory authority to do that.
[English]
The Chair: Mr. Redman, you are the Principal Economist, Strategy and Operations of the OSC. You indicated at the outset that you have taken an interest in what the committee was studying. I suspect you've read some of the testimony that's been presented to us.
Mr. Redman: I have.
The Chair: What do you think about when you go back and think about strategy? You're an economist. You're looking out to the future of what's liable to happen. What are the types of things that go through your mind as you read the testimony that's being presented to us?
Mr. Redman: Well perhaps there is an oversimplification. This is complex. There are a lot of different issues here in different areas and some may be securities related. Many are well outside the jurisdiction of our agency.
But obviously there are issues, as we've spent today talking about, to what extent digital currencies fit into different regulatory regimes. I think our perspective is that, to the extent it would be defined as a security, our existing regime would fit it. But in terms of thinking that through, there are obviously questions. Given this virtual asset class, this is a new development. How do you value it? How do you make sure there's safekeeping around it? How do you manage the risks associated with it? We've all seen stories of exchanges being hacked, people losing money and things like that. It's a fairly new industry. Things will develop over time and I'm sure traditional banking had risks associated with it when it was made up of thousands of banks in small towns across the country. It will develop over time and I think some of these things will get ironed out and the industry will evolve. Colleagues of the AMF are taking initial steps in looking at these as many services businesses and things like that. It will evolve and I think the challenge is to create a structure around it that allows it to evolve in a way that still protects consumers.
The Chair: When you come back before this committee in 10 years, I won't be here, but everybody else will. Will you be talking about digital currency or will you be on another subject?
Mr. Redman: I think we'll still be talking about digital currencies. It may not be bitcoin; it may be something else. But it certainly seems, from my perspective anyway, that this has traction in terms of appeal to certain people as a means of transferring money, paying for things with lower transaction fees and things like that. I would expect it to still be a topic of discussion, yes.
The Chair: Thank you. Would anybody from Quebec like to add to that?
I'm going to go to round two now.
[Translation]
Senator Massicotte: You said that one of the initial reasons behind the regulatory regime was the need to prevent money laundering and establish the integrity of businesses. What information do you currently have in that regard? Has Quebec had many cases where it was proven that people were using digital currency to launder money?
Mr. Fortin: We didn't come across any. We tied it to the integrity element earlier. The decision to regulate money services businesses came about after such businesses were found to engage in criminal activities and money laundering.
There were cases involving exchange offices. That was our starting point. One of the regulatory tools we use is the security clearance report that police departments and the Sûreté du Québec provide; they check criminal history to determine the business's integrity. The idea is that certain digital currency-related businesses may engage in money services activities and that, through the licensing requirement, we will be able to validate the integrity of those businesses. Our position was not that we had identified issues with these types of businesses but, rather, that, if we acknowledged the money laundering and fraud risks associated with the use of digital currency, we could check whether businesses operating in this field had the integrity required.
To answer your question directly, we did not find that businesses offering these services were engaging in criminal activities. The element that keeps coming up in all the international research we've done so far is the anonymous nature of the transactions. Clearly, that anonymity benefits individuals looking to carry out transactions in the criminal underworld, in terms of drugs or weapons, for example. That isn't a situation we came across in Quebec, only in our Internet research. But that is where things stand as we speak. We haven't seen any such instances in the province.
[English]
Senator Massicotte: Mr. Redman and Mr. Sinclair, same question. In your experience, have you noticed cases of whitewashed money through the use of crypto-currency of any sort? Have you seen instances of that in the provinces? Are there concerns?
Mr. Redman: I'm not aware of it, but it's not my area of expertise.
Mr. Sinclair: My answer is similar to that of Jean-François. We read about this in other jurisdictions where people are using the anonymity of virtual currency to engage in money laundering and other things. To our knowledge, we haven't seen anything at the OSC. That's one of the reasons we want to pay attention to this.
Senator Massicotte: In other jurisdictions in the world you see major cases where they've used the currency and the currency is not the problem. Is it because you're not aware of it and you haven't been properly organized to become aware of it or are Canadian criminals just not as smart as international criminals?
Mr. Sinclair: I would have thought that this kind of stuff would be more in Ontario in keeping with what the OPP or the Ministry of the Attorney General might be involved in through enforcement of the Criminal Code. If it doesn't fall within the securities world and isn't something that we would first take notice of if it's happening, then it would be something that they might be acting on but we just haven't heard that they are. I don't know the answer to your question about whether or not the criminal world in Ontario or Canada, for that matter, is behind. It's just not something that we've had exposure to at the commission.
[Translation]
Senator Massicotte: One last question, Mr. Desjardins. Earlier, we talked about firms outside Quebec that do business with Quebecers. The answer is that we assume the regulatory regime in the country where the firm is headquartered is as stringent as ours, but we know of cases where businesses that deal in bitcoin move to some Caribbean island with little or no regulation. I assume that a Quebecer can do business with that firm, exchange bitcoin and launder money without anyone knowing. I would think that, under Quebec law, an individual doing business with a Quebec firm has to comply with Quebec's rules. How are you kept informed of those kinds of cases, and how do you handle them? Of course, it depends on whether the individual is involved or not, but chances are that they didn't do anything wrong and that the firm issuing the bitcoin is laundering money. Then, we are stuck; I don't think we have any options in that case.
Mr. Fahmi: In answer to your question about what we can do, or what we do do, these firms are carrying out a commercial activity in our jurisdiction via a Web site. It's similar to those who use platforms to sell binary options or derivative instruments to Quebecers. Those people have to register with us as soon as they begin carrying out a commercial activity in our jurisdiction. Individuals who own money services businesses and carry out commercial activities in Quebec also have to have a licence. How do we take a proactive approach in such a fluid environment? We have a cyber-surveillance team that monitors the Internet. The things they look for range from online ads to various platforms, and they can use a number of different investigative techniques.
Senator Bellemare: All of you talked about cryptocurrency, but little has been said about the block chain technology behind that currency. Do you think there are ways that the technology could be used, down the road, for securities and their trading? Could it have a significant impact on stock exchanges?
Mr. Fortin: I don't know. Mr. Fahmi, do you want to try to answer that?
Mr. Fahmi: As far as the protocol is concerned, we often talk about bitcoin. We can already define bitcoin. When we talk about bitcoin with a lower-case B, what we are referring to are currencies, and when we talk about bitcoin with a capital B, we are referring to the technology. How do you build confidence within a decentralized network among people who don't know each other? The protocol can be applied to other functions. I know that, in the U.S., people try — sometimes legally, sometimes illegally — to set up stock exchanges listing companies that should be licensed by various regulators. And there have been cases where the SEC has sanctioned companies for behaving wrongfully. People are trying to set up exchanges based on a similar protocol of building confidence in a decentralized network. Will it have an impact? I couldn't say. People will certainly try to export the digital currency protocol and apply it to other security-related areas. We will remain vigilant, however, to keep that from happening in Quebec.
Senator Bellemare: I have another quick question. I don't want to attribute this to the committee, as it isn't something we discussed. It's merely something I thought about, given all the meetings we've had. The definition of bitcoin, or cryptocurrency, is virtually the same as that of quasi-money. It isn't currency in the typical sense but, rather, in the quasi-money sense. If we were to approach cryptocurrency from that standpoint, would it be appropriate for Canada to consider putting comprehensive legislation in place, as New York did?
Mr. Fortin: I'm not familiar with New York's proposed regulations, but, possibly, yes. Again, I think that would be outside our area of expertise. It's hard for us to say what a comprehensive regulatory system should look like. If New York's system is successful, it could be an option worth considering, but it's hard for us to say anything more on the subject.
Senator Bellemare: Any further thoughts, on your end?
[English]
Mr. Redman: I would agree with my colleague on that. I'm not familiar enough with what has taken place in New York to be able to comment on whether it's something we would want to pursue in Canada.
The Chair: Before concluding, I want to indicate to members of the committee that I am delighted to be able to tell you today that the 0.18 bitcoin I purchased for $100, which as you know sank to below $50 just two weeks ago, is today at $67.59 — a 30-plus increase in the past two weeks.
Senator Massicotte: Don't forget to pay your capital gains tax.
The Chair: On behalf of all members of the committee to our witnesses and guests today, I thank you very much. This is a perfect ending to our deliberations.
(The committee adjourned.)