How Canadians interact with money – both physical and digital – is changing as financial technology evolves.
Bitcoin may be the most famous cryptocurrency since it emerged in 2009, but it stands far from alone on the financial landscape.
There are hundreds of cryptocurrencies worldwide, which are in essence a medium of exchange like the Canadian dollar that are fully decentralized from the control of governments. Cryptocurrencies are virtual currencies that use encryption to generate and regulate the units of currency across many computers, so they are not issued by a central authority.
Though each may be tailored to fulfill certain criteria, such as those that focus more heavily on privacy and anonymity, cryptocurrencies were all designed to meet a number of basic aims.
Danny Wettreich, the founder and chief executive officer of GreenBank Capital Inc., which has developed GreenCoinX, a cryptocurrency where users are not anonymous. (GreenBank Capital Inc.)
“The whole point about cryptocurrency is it’s a fast and inexpensive way to move money around the world outside of the banking system,” says Danny Wettreich, the founder and chief executive officer of GreenBank Capital Inc. He points out that the advantage is that it can be done without an intermediary, such as a bank, which would habitually take its cut for rendering its services.
As a result, Toronto-based GreenBank Capital, which also has offices in the United States and the Britain, has developed GreenCoinX, which it calls the world’s first cryptocurrency where users are not anonymous and features digital identification. Opening a GreenCoinX account is much like opening a traditional bank account, where users must present government-issued identification, such as a passport or driving licence, to qualify.
While GreenCoinX can be moved from country to country through its free exchange, Mr. Wettreich, a native Englishman who moved to North America 30 years ago, says the other advantage of cryptocurrencies is that they open up the world for 2.5 billion people globally without access to a bank account.
As an example, he mentions India, a key area of growth for GreenCoinX and a country that he describes as a 95-per-cent cash society. But with 70 per cent of the population owning mobile phones, even without a bank account people can access the Internet, open up their GreenCoinX virtual wallet, access a website and purchase something, thereby entering the world of commerce.
“As a mode of payment it has huge benefits, and as the world is moving toward a cashless society, which it definitely is, the obvious place to go is cryptocurrency,” Mr. Wettreich says.
Cybercurrencies don't currently play a big role in how people pay, says Jan Pilbauer, vice-president of information technology and chief information officer at the Canadian Payments Association. (Canadian Payments Association)
Cryptocurrencies can serve any number of roles.
“The interesting part about digital currencies is that different people come up with interesting and innovative concepts,” says Bobby Ong, the Malaysia-based co-founder of Coin Gecko, a cryptocurrency valuation and ranking website.
Mr. Ong mentions cryptocurrencies such as Dash, which boasts added anonymity as the transaction trail is constantly being mixed up. Another, called Dogecoin, is used to facilitate tipping for valued or amusing content on social media sites such as Reddit or Twitter.
MaidSafeCoin, which sprung up two years ago, allows users to be paid for renting out spare space on their hard drives, essentially becoming a decentralized DropBox.
The space “can store things for other people on the network and then I get paid tokens in MaidSafeCoins and these tokens can be redeemed for Bitcoins or U.S. dollars later on,” Mr. Ong says.
However, even while Bitcoin has achieved a market capitalization of about $9-billion (U.S.), its role in everyday life has been fairly minimal. According to Jan Pilbauer, vice-president of information technology and chief information officer at the Canadian Payments Association, Bitcoin represents a fraction of the overall payments for goods and services.
“You can get a debit card which draws on your Bitcoin accounts,” he says. “There are large merchants that accept Bitcoin, but it’s still not getting traction, especially in Canada on the domestic level.”
Mr. Pilbauer feels that the timing of the creation of cryptocurrencies may have played a role in this. Bitcoin emerged as the first shortly after the 2008 financial meltdown, when the public’s trust in banks and governments was at its lowest.
But “based on the slow adoption rates, it seems people are more comfortable depositing their wealth into the traditional financial institutions,” he says.
Others have pointed to the anonymity, or pseudo anonymity, of cryptocurrencies as creating an environment ripe for exploitation by those looking to hide from government, sell drugs or fund terrorism.
It is this darker side that has turned many people off of Bitcoin, Mr. Pilbauer says.
In fact, fears about cryptocurrencies include that exchanges can be hacked, the network of computer operators working on the currencies could take them over, or the energy output required to create and maintain them could become an environmental problem.
Alex Tapscott, the founder and chief executive officer of Northwest Passage Ventures, an advisory firm building businesses that are underpinned by blockchain, and the co-author of a book about blockchain, sees specific potential for different cryptocurrencies that even governments and those involved in the existing financial systems are interested in. (Courtesy of Alex Tapscott)
However, others view cryptocurrencies differently.
“There are a few myths about cryptocurrencies,” says Alex Tapscott, the founder and chief executive officer of Northwest Passage Ventures, an advisory firm building businesses that are underpinned by blockchain, the virtual ledger that records every transaction that takes place on a cryptocurrency.
The co-author of a book about blockchain sees specific potential for different cryptocurrencies that even governments and those involved in the existing financial systems are interested in.
He points to Ben Bernanke, former chairman of the U.S. Federal Reserve, who said in 2013 that Bitcoin could be used as a way to improve the efficiency and risk profile of financial markets.
“I don’t believe that Bitcoin or [other cryptocurrencies are] ever going to replace the U.S. dollar or the Canadian dollar, at least not in my lifetime, and I plan on living for a while,” Mr. Tapscott says. “But I do think that these are superior options to what a lot of people have in parts of the world where the local currency is weak, subject to inflation or capital controls.”
The Isle of Man, a British protectorate, last year became the first government to endorse a cryptocurrency when it welcomed the decision by GreenBank Capital to open an office there.