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Two former Canadian politicians are pressing Ottawa to declare bitcoin a currency under the Bank of Canada Act.

In a submission to the House of Commons standing committee on finance, Jason Dearborn and Andrew Thomson of Dominion Bitcoin Mining Co. Ltd. argue that bringing cryptocurrencies under federal jurisdiction would create consistent rules that would better protect Canadian investors.

“The risk of having B.C. create one set of rules and Ontario another – for how bitcoin is used, stored or transacted – is really quite troublesome,” says Mr. Thomson, a former Saskatchewan finance minister.

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Inconsistent rules can lead companies to hop between jurisdictions in order to take advantage of loopholes – a tactic known as regulatory arbitrage.

The question of how to categorize virtual currencies has baffled regulators around the globe. Should bitcoin be treated as a currency, a commodity, a security or something else entirely?

Japan has been an early mover on the regulatory front. Last year, it introduced a law that recognizes bitcoin as a legal method of payment and began regulating cryptocurrency exchanges.

Canadian regulators have been less clear. A staff notice issued last August by the Canadian Securities Administrators, an umbrella organization of provincial securities regulators, said regulators will decide on a case-by-case basis whether a new token or coin offering has the characteristics of a security or not.

The encrypted digital tokens are created using a distributed ledger, and many early-stage companies have been selling digital tokens or coins to finance new ventures.

But the Ontario Securities Commission has called for additional clarity from the Bank of Canada regarding whether cryptocurrencies such as bitcoin and ether are currencies or not.

Last October, while speaking to a crowd of anti-fraud professionals, a top official at the OSC said the Bank of Canada “has its head in the sand” on cryptocurrencies. The central bank’s failure to decide whether cryptocurrencies are actually currencies or not has made it tougher for the provincial watchdog to regulate investment activity in the area, according to Jeff Kehoe, the OSC’s head of enforcement.

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The Bank of Canada fired back that senior deputy governor Carolyn Wilkins has already commented on the central bank’s stance. Ms. Wilkins told a financial-industry conference in Toronto last year that bitcoin and other cryptocurrencies are currently being treated as commodities under tax law.

“We don’t consider them to be money because they don’t meet the fundamental qualities of that,” Ms. Wilkins said at the time.

Recognizing cryptocurrencies as currencies would allow the federal government to license digital wallets, a move that would help Canadians keep their assets safe, said Mr. Dearborn. It would also make it easier for the government to collect cryptocurrency taxes, he added.

“This would best be managed by the federal government so that you have one rule for all Canadians, instead of the alternative, which could be a hodge-podge of rules,” said Mr. Dearborn, a former member of Saskatchewan’s legislative assembly.

Dominion Bitcoin Mining Co., or DBMC, started out in the business of cryptocurrency mining – the process through which computers create new currencies by completing complex mathematical equations – but has since pivoted to helping investors acquire and store their bitcoin in a secure and legally compliant way.

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