Former U.S. President and Republican presidential hopeful Donald Trump gestures at the Bitcoin 2024 event held in Nashville, Tennessee, on July 27.Kevin Worm/Reuters
Andreas Park serves as a Finance Professor at the University of Toronto Mississauga and also holds the position of Academic Director at Rotman FinHub.
Since the recent U.S. presidential elections, the price of Bitcoin has surged beyond US$94,000. While this increase may seem to stem from optimistic libertarian views regarding President-elect Donald Trump’s return, there’s a deeper story unfolding in the U.S.
The rising prices are indicative of the industry’s optimism towards potentially more favorable policies in the future, as well as advancements in payment technologies across the United States.
Conversely, Canada’s environment presents a stark contrast. Once a pioneer in cryptocurrency and fintech, with Ethereum originating in Waterloo, Toronto, the country has witnessed governmental attitudes that stifle innovation and investment. As a result, it has fallen behind. The situation in the financial sector particularly stands out; let’s focus on a seemingly trivial aspect: payments.
Recently, a parliamentary committee scrutinized Ramesh Shiromani from the Royal Bank of Canada regarding wire transfer fees. A 2023 report by McKinsey reveals that Canadians incur higher payment costs per capita compared to those in several peer countries, often more than double the expenses seen in developed and developing nations alike.
To foster a more competitive and functional payment market, Canada desperately needs enhancements, yet we lack even fundamental solutions. Since the initiation of the Payments Modernization Initiative in 2012, promises of real-time payment systems linger, but a decade later, Canada remains the only G7 nation without such infrastructure. This stagnation largely stems from banks delaying progress. A recent CD Howe report suggests that implementing efficient payment systems could save Canadians substantial amounts of money.
So, what’s the connection to cryptocurrencies? Amidst the U.S. presidential buzz, an important development went somewhat unnoticed last week—257 members of the House of Representatives and 16 senators, bipartisan and crypto-friendly, were elected. This group anticipates that the new U.S. Congress will provide legal and regulatory clarity for the industry while reigning in what detractors view as government overreach.
With President-elect Trump coming to power, substantial changes may be on the horizon. Typically, new administrations witness significant policy shifts, and it’s expected that current SEC Chairman Gary Gensler will resign, ending what many perceive as anti-cryptocurrency and anti-market initiatives. Upcoming legal actions against crypto companies may also be dropped.
Thus, the recent price rally indicates rising enthusiasm and expectations for the cryptocurrency sector. This is not merely a rebound into a speculative frenzy reminiscent of 2018 or 2021. There’s hope that the days of fraudulent tokens and unserious projects are waning, although some remnants may resurface. More significantly, in recent years, diligent developers have been busy enhancing their projects. Many of these are now ready for launch, as exemplified during last week’s DevCon developer conference in Thailand, which showcased promising innovations.
For instance, Ethereum plans to launch major enhancements aimed at increased speed, scalability, affordability, and security. The Labyrinth Protocol promises full consumer privacy yet complies with KYC and AML regulations, enabling fintech companies to develop compliant blockchain applications.
Moreover, Coinbase and stablecoin provider Bridge, soon to be integrated with fintech giant Stripe, have connected bank accounts with blockchain technology, facilitating instantaneous domestic and international payments with near-zero fees. (A stablecoin is a cryptocurrency whose value is tied to a fiat currency.) This kind of technology could allow Canada to establish a competitive real-time payment system with minimal associated costs almost overnight.
On a forward-looking note, Circle, the firm behind USDC, the world’s second-largest stablecoin, has introduced a project termed Crossmint, which merges blockchain payments with AI agents. These mini-applications, akin to digital personal assistants, could automate routine business and personal tasks. For these systems to operate, autonomous payment capabilities are essential. While Visa may not support this, crypto stablecoins can.
This stands in stark contrast to conditions in Canada. Legitimate blockchain companies often struggle to even open bank accounts due to fear of government intervention. Additionally, Canadian blockchain and tech users face restrictions from international platforms. Disturbingly, Canada was one of the few nations, along with Iran and North Korea, to be barred from utilizing Google’s BARD chatbot (now rebranded as Gemini) in 2023.
Blockchain technology is here to stay, and Canadians stand to benefit greatly. It is imperative that unnecessary regulations and obstacles be removed to prevent the risk of becoming a digital backwater.
