Republican presidential nominee and former U.S. president Donald Trump gestures at the Bitcoin 2024 event in Nashville, Tenn., on July 27.Kevin Wurm/Reuters
Andreas Park is a professor of finance at the University of Toronto Mississauga and Rotman School of Management. He is the academic director of the Rotman FinHub.
Bitcoin has surged to more than US$94,000 since the U.S. election. It might seem like this rise is driven by libertarian fantasies following president-elect Donald Trump’s return, but that’s a superficial take. There’s something much more profound happening in the United States.
The surge in prices is a reflection of the industry’s view of more permissive policies to come and the rapid development of payments technology in the U.S.
Meanwhile, let’s take stock of where Canada stands. Once a leader in the crypto (and fintech) space – ethereum originated in Waterloo-Toronto – we have fallen behind owing to a government stance that is often hostile to technology and investment. The financial sector offers a perfect example, and I’d like to focus on a seemingly mundane topic: payments.
Last month, a parliamentary committee grilled Royal Bank of Canada’s Ramesh Siromani on e-transfer fees. According to a 2023 McKinsey report, the per capita cost of payments in Canada – the money coming out of each and every Canadian’s pocket just to move bits and bytes across our banks’ databases – is more than double that of comparable Organization for Economic Co-operation and Development countries.
We badly need a more competitive, functioning market for payments, but we’re missing even the most basic tools. Since the 2012 Payments Modernization Initiative, we’ve been promised a real-time payments rail in Canada. Yet, a decade later, we remain the only G7 country without one, largely because banks have been allowed to stall the project. A recent C.D. Howe report estimates that introducing such a service could save Canadians billions.
So, what does this have to do with crypto? Amid the U.S. presidential drama, what received less attention last week was the election of 257 House of Representatives members and 16 senators who openly support crypto. This group includes both Republicans and Democrats, raising real hope that the new U.S. Congress will bring bipartisan legal and regulatory clarity to the industry while reining in what critics have called government overreach.
With president-elect Mr. Trump, significant changes are likely on the horizon. As is customary with a new administration, the current chair of the U.S. Securities and Exchange Commission, Gary Gensler, is expected to resign soon, ending what critics have deemed his anti-crypto and anti-market agenda. Pending and planned lawsuits against crypto firms will also likely be dropped.
In other words, the recent price surges reflect the growing excitement and anticipation about what’s to come in the crypto space. To me, this isn’t about a return to the chaotic, speculative frenzies of 2018 or 2021. I sincerely hope the era of scam tokens and trash projects is behind us – though, unfortunately, some of that nonsense will likely resurface. Instead, I believe something more meaningful is emerging. Over the past few years, serious developers have been quietly building and refining their projects. Many of these are now set to launch, and last week’s DevCon developer conference in Thailand provided a glimpse of the exciting innovations we can look forward to.
For example, ethereum, a blockchain computing platform, is set to implement significant upgrades to become faster, more scalable, cheaper and more secure. The Labyrinth Protocol will enable full consumer privacy and business confidentiality while meeting regulatory standards for know-your-customer (KYC) and anti-money-laundering (AML), paving the way for fintech providers to offer compliant, blockchain-based applications.
Coinbase and stablecoin infrastructure provider Bridge (soon to be part of fintech giant Stripe) have recently integrated bank accounts with blockchain, enabling instant domestic and international payments with virtually zero fees. (Stablecoins are cryptocurrencies whose values are pegged to fiat currencies.) A technology like this in Canada could create a competitive real-time payments network with minimal fees – overnight!
On a more futuristic note, Circle, the company behind USDC – the world’s second-largest stablecoin – has announced a project with Crossmint to combine blockchain payments with artificial intelligent (AI) agents. These mini-applications, akin to digital personal assistants, could soon automate mundane business or personal processes. To function, they need the ability to make payments autonomously – Visa won’t work, but crypto stablecoins will.
All that stands in sharp contrast to the situation in Canada. Legitimate blockchain businesses frequently struggle to even open a bank account because banks fear government scrutiny. Meanwhile, Canadian blockchain and tech users face bans from international platforms; embarrassingly, alongside Iran and North Korea, Canada was one of the few countries initially excluded in 2023 from using Google’s BARD chatbot (now renamed Gemini).
Blockchain technology will not get uninvented, and Canadians have so much to gain. It’s time to remove unnecessary restrictions and barriers so we don’t risk becoming even more of a digital backwater.