Last updated on May 30th, 2014 at 02:30 pm
This week, the Canadian non-partisan think-tank Montreal Economic Institute (MEI) published a report highlighting how Canada is the second most popular country for the peer-to-peer decentralized virtual currency bitcoin. It also warned that with bitcoin being associated with illicit transactions and without government regulation then it could hinder growth and development in Canada.
“In order for it to develop its potential and be adopted by a growing number of users, clear rules are required, along with some kind of governmental acceptance,” study author David Descoteaux said in a statement. “These clear rules, as well as a tax treatment that allows bitcoin to be used as a currency, explain why the digital currency is popular in Germany and why this country was one of the first bitcoin hubs. Canada has so far been quite welcoming to bitcoin, and in clarifying its own regulatory framework, it should ensure that it remains so.”
Although Canada is home to venture capitalists and angel investors interested in allocating money into bitcoin firms, the financial community and the federal government have been quite hostile to the cryptocurrency. Former Finance Minister Jim Flaherty said bitcoin poses a threat to financial institutions, while the Bank of Montreal has closed down bitcoin-related business accounts.
In response to the economic note by the MEI, the Canadian Bitcoin Foundation stated that it would much prefer if the federal and provincial governments kept out of the affairs of the bitcoin economy and community.
The organization published a statement Thursday in which Bitcoin Foundation Canada disagreed with Descoteaux’s conclusions.
“Government intervention is not required for Bitcoin to develop and become accepted by the Canadian public. The Bitcoin network is completely decentralized and it simply cannot be subjected to government control,” said Francis Pouliot, public affairs director at the Bitcoin Foundation of Canada, in a statement. “Canadian authorities must maintain their current neutral regulatory stance if these businesses are to continue investing and creating jobs in Canada.”
Pouliot added that it is a standard procedure for Canadian authorities to request the identities of bitcoin customers in order to abide by anti-money laundering legislation, which he expects bitcoin firms to adhere to. This would legally suffice and no other regulation would be needed, says Pouliot.
Furthermore, a regulation such as BitLicense, which is currently being discussed in the state of New York, could pose harm to bitcoin startups and prompt them to migrate somewhere else, especially considering that Canada is home to so many of these companies.
The Bank of Canada, the federal government or the Office of the Superintendent of Financial Institutions have not instituted regulations on bitcoin or any other virtual currency The Canada Revenue Agency (CRA) has classified bitcoin and others like it as simply another commodity and would be subjected to taxation.