Ethan Lou’s book, Once a Bitcoin Miner, is forthcoming from ECW Press.
In the wake of the latest B.C. bitcoin scandals, I talked to the executive director of the provincial securities commission, Peter Brady, who warned investors to be careful because, sometimes, there is nothing the regulator can do.
Then I talked to a 62-year-old technology illiterate named Keith who reached out because he needed someone to help him buy bitcoin, face to face. I later learned someone I know had already tried to help him, with little success. If Keith had contacted someone malicious – and there are many – he could have easily been led into something shady and ended up with no recourse.
Those two conversations are jarring when juxtaposed and underscore a growing problem, particularly in the West. In just over a month, the B.C. Securities Commission has issued three statements on separate cryptocurrency matters, including an announcement of an active investigation, a departure from usual practice.
Therein lies a quagmire: What do you do when the sector is hard to police, but shady operations are easy to set up and the world is filled with clueless victims? A heavy hand is bad for innovation, but so is lawlessness. And innovation, believe it or not, is something in which Canada had a head start. It would be a travesty to see it eroded by the Wild West.
Cryptocurrency has become its own multibillion-dollar industry and enriched many, and it’s barely 10 years old. Everyone in it, even the most knowledgeable, had come from somewhere else. It is a land of new beginnings, where anyone can rise high. But that frontier also attracts the uninitiated, seeking fast riches – and the snake-oil salesmen and slipshod wildcatters seeking the same.
The scene is particularly rife in the coastal British Columbia, home to the world’s first bitcoin ABM, the first registered cryptocurrency investment firm in the country and numerous listed blockchain companies. The sector has an oversized presence there, with great potential. But that also amplifies the bad actors.
The B.C. commission’s first statement warned about two products that used the cryptocurrency name, but “resemble a pyramid scheme.” Two other statements came on the same day this month, about the trading platforms ezBtc and Einstein Exchange, accused of owing millions to users. Those bring to mind the collapsed QuadrigaCX, also from Vancouver, whose users claim more than $200-million.
There is no solution in sight. There are new rules proposed, but they deal only with exchanges and are crafted by securities regulators with complicated requirements. Observers have questioned whether it is even their business, given bitcoin is widely considered to not be a security. Some say the rules are so onerous, they will chase exchanges away.
Self-regulation has long been talked about. But if there was the will, it would have happened already. Cryptocurrency has a sharp individualistic bent and the community has rarely agreed on anything.
In that vacuum come bandits and charlatans and the wrong sort of attention that ripples. It affects the programmer who hesitates when considering blockchain work. It affects the bank that refuses accounts to cryptocurrency businesses. It affects the misguided city that considered banning bitcoin ABMs.
Outside cryptocurrency circles, many do not know – and inside, many forget – that the biggest players in the sector have strong Canadian roots. Ethereum’s ether, the second-most valuable cryptocurrency, was started by a Torontonian. Binance, the world’s biggest exchange, was founded by a Vancouverite.
Neither has a significant presence in Canada, with Binance never having had any to begin with. That is not directly because of the lawlessness, whose symptoms only recently showed to the wider public. But the resulting disrepute, unnecessary and undeserved, stands in the way of what would keep future Ethereums and Binances in this country.
Canada has all the potential to be the leading hub for cryptocurrency and blockchain, its name invoked in the same way Switzerland is for watches. The powers that have the ability to make it so, to craft permissive policies. But when all they see is scandal and turmoil, they question whether it is worth the trouble.
It may be chicken-and-egg. While exchanges serving Canadians may be tied to the land, cryptocurrency itself is borderless. Do firms flee because there are no permissive policies? Or are there no policies because firms have fled?
Whatever the case, the path to more innovation begins with the disparate parties coming together to pay some serious attention to this space and the cleansing of a temple that, to many outside, has been flushed thick with the scent of thieves.
It begins in the Wild, Wild West.