The concept of “virtual currency” is so new that authorities are reluctant to regulate it for fear of stifling innovation.
A June report from the Standing Senate Committee on Banking, Trade and Commerce cautions against any real effort to regulate virtual currencies such as Bitcoin. After more than a year of study and consultation with a wide range of stakeholders, the committee has concluded that policy-makers should keep their collective noses out of this area for now.
The report makes eight recommendations, most of which call on the federal government to look for ways to use the underlying technology rather than restrict it.
For example, the report recommends the government consider using the “blockchain” technology that underpins crypto-currencies such as Bitcoin as a new way to deliver government services and to enhance cybersecurity. In particular, the report recommends that the Canada Revenue Agency and the Financial Transactions and Reports Analysis Centre of Canada use blockchain technology as part of their processes.
The committee’s report advises the government to take a “light touch” approach to avoid stifling innovation.
The only area in which the report recommends any sort of oversight is for digital currency exchanges that allow people to convert between traditional physical currencies and digital ones. These exchange firms should be required to meet the same rules as “money services businesses,” the report says, to guard against money laundering.
The best strategy is to monitor the development of crypto-currencies and revisit the issue in a few years, the report concludes.
The report praises the concept of blockchain technology as “ingenious” and expresses the committee’s excitement over the technology’s potential as a tool for both improved financial inclusion and enhanced online security.
“Bringing financial services to the unbanked in the developing world is one of the exciting things we heard about,” the report says. “The committee developed a vivid sense of how this is possible and is already happening.”
At the same time, the committee’s report also suggests that the technology has the potential to protect personal information: “Blockchain technology gives consumers the power to provide their own hack-proof online security.”
The report expresses a belief that the potential of similar technologies is just beginning to be discovered: “We’ve heard, and we agree, that blockchain technology is at a delicate stage in its development and use. This is why we urge the government to explore the vast potential of this technology, while treading carefully when contemplating regulations that may restrict and stifle its use and development.”
While the committee’s report acknowledges the risks, such as money laundering and tax evasion, that accompany the anonymity of functioning online, the report comes down firmly on the side of the “techno-utopians,” concluding that the potential benefits far outweigh such threats.
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