Digital Currency: You Can’t Flip This Coin!

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About the Study

The Senate Banking Committee launched its study on digital currencies in March 2014. While the focus of the Committee’s study was “digital currencies” in general, many witnesses spoke specifically about cryptocurrencies, which are digital currencies that rely on encryption. Bitcoin was the cryptocurrency most often discussed by witnesses.

Public hearings in Ottawa and a fact-finding trip in New York City enabled Senators to explore the potential uses for these currencies, and to learn about the opportunities, the risks and challenges resulting from the use of digital currencies and their technologies.

Who did the Committee hear from during the study?

During the study, Senators heard from 55 witnesses, including representatives from federal departments and agencies, the Bank of Canada, law enforcement entities, provincial securities regulators, the financial services sector, digital currency-related businesses, trade associations, a charity, money services businesses and payment card operators. They also heard from academics, lawyers, and individuals who participate in the digital currency sector.

What did the Committee learn?

The use of cryptocurrencies has resulted in a range of opportunities, including:

  • Using blockchain technology to allow individuals to control and manage their security and online identity;
  • Reducing the need for intermediaries in the payments system that enables lower transaction costs; and
  • The potential to bring financial services to developing countries.

 

The emergence of new technologies inevitably comes with a number of challenges such as: 

  • Exploiting the anonymity of digital currencies to  undertake illegal activities, such as money laundering, terrorist financing and tax evasion;
  • Losing digital currencies because of cyber-theft, bankruptcy of a digital currency exchange, or volatility in the price of digital currencies; and
  • Applying our taxation rules to digital currency transactions in a manner consistent with other types of transactions.

 

What are the next steps?

The Committee believes in the potential of the underlying technologies of cryptocurrencies and the importance of monitoring these associated technologies as they evolve. A regulatory environment that allows the positive benefits of these technologies to flourish is essential. To this end, the Committee has made eight recommendations to the Government of Canada.

Senators who participated in this study

Chair
Irving Gerstein
C - (Ontario)

Deputy Chair
Céline Hervieux-Payette
Lib. - (Bedford - Quebec)

Diane Bellemare
C - (Alma - Quebec)

Douglas Black
C - (Alberta)

Larry W. Campbell
Lib. - (British Columbia)

Stephen Greene
C - (Halifax - The Citadel - Nova Scotia)

Ghislain Maltais
C - (Shawinegan - Quebec)

Paul J. Massicotte
Lib. - (De Lanaudière - Quebec)

Pierrette Ringuette
Lib. - (New Brunswick)

Scott Tannas
C — Alberta

David Tkachuk
C - (Saskatchewan)

Ex-officio members of the committee:
The Honourable Senators Claude Carignan, P.C. (or Yonah Martin) and James S. Cowan (or Joan Fraser)

Other Senators who have participated from time to time in the study:
The Honourable Senators A. Raynell Andreychuk, Michael L. MacDonald, Fabian Manning, Don Meredith, Percy Mockler, Thanh Hai Ngo, Dennis Glen Patterson, Rose-May Poirier, Nancy Greene Raine, Michel Rivard, Betty E. Unger, and David M. Wells.

Contact information

General Information:
613-990-0088 or 1-800-267-7362

Email: BANC@sen.parl.gc.ca

Mailing Address:
Senate Committee on Banking, Trade and Commerce
The Senate of Canada
Ottawa, Ontario
Canada, K1A 0A4

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