Cryptocurrencies may seem scary, but ignoring them should scare us more

  • National Newswatch

So far, 2022 has been a rough year for crypto.After hitting all-time highs, well-known digital currencies such as Bitcoin and Ethereum saw dramatic dips, companies that deal in crypto announced lay-offs, and a short-lived craze in non-fungible tokens (NFTs), a related technology, both grew and popped spectacularly.Retail investors – some of whom were new to exploring and learning more about digital currencies, NFTs, and blockchain – lost money and confidence, and some media questioned whether cryptocurrency and blockchain has a future.I'm here to tell you that it does.A lot of what we saw happening in cryptocurrencies mirrored the downturns that affected all markets. As inflationary pressures have started to ease, we have seen the value of crypto trending back up.Venture capitalists are still investing despite market circumstances, developers are building critical infrastructure, and many retail investors hold or plan to hold crypto assets. A recent Nanos Research survey found over nine in 10 Canadians have heard of cryptocurrency and 10 per cent currently hold a crypto wallet, the same as the number of people with RRIFs (10%) and slightly lower than those investing in RESPs (14%).Last week, Canadian crypto and blockchain leaders met in forums across the country to discuss these topics in a series of events we called Canadian Crypto Week. Among the subjects under discussion was how to ensure that Canadians participate and succeed in the new Web3 economy.Despite everything, these leaders understand that the unique advantages offered by crypto and the blockchain technology that underpins it, far outweigh the temporary ups and downs of a new technology finding its place in the world.Blockchain offers unmatched benefits in efficiency, transparency, and security, each aspect of which offers advantages to the Canadian economy and the opportunity for citizens to thrive and businesses to compete in the digital economy.One benefit is greater ease in completing cross-border transactions, which enhances commerce and provides tangible benefits to, for instance, migrant workers who can capture more value from their work by bypassing bank transaction fees of up to 7 per cent. For creators, NFTs provide a powerful option to earn a living from their creativity.Much like the early days of the Internet, blockchain and related technologies have unleashed a wave of innovation and creativity for a generation of entrepreneurs. And also like the early days of the Internet, some of these technologies have experienced the ups and downs typical of disruptive technologies.As with the Internet, cryptocurrencies and open protocols will continue to support innovative new use cases that revolutionize the way we interact and conduct business. However, the current situation is making it increasingly clear that for Canada's digital economy to thrive, we need the kind of mature regulatory system enjoyed by traditional currencies and financial instruments.An unregulated and ignored digital economy will increase the risks of volatility, which work against Canada's long-term interests and prosperity. That's why we support meaningful public consultations that lead to principles-based regulations. This will foster an environment that supports the growth of our industry. Ultimately, governments must stop trying to put a square peg in a round hole by regulating crypto assets through outmoded mechanisms. We need a dynamic framework designed for the unique attributes of cryptocurrencies and blockchain.Some may think it strange for an online and currently unfettered industry to ask for regulation. No industry ever wants to be over-regulated and being digitally based and stateless means crypto would likely still thrive in a rule-free environment. But we still want it.Legal clarity incentivizes innovation, and the lack of clarity in Canada stifles the ability of Web3 entrepreneurs to create value at home by pushing them to jurisdictions with friendlier and clearer rules, like the European Union, which is implementing legal frameworks to support cryptocurrencies.The current downturn offers one major advantage: it gives Canada the opportunity to think about our place in a future economy that includes blockchain and NFTs and time to make it happen. This includes adjusting our financial regulatory system to include cryptocurrencies and other blockchain-based assets.The last round of government public consultations on crypto and blockchain took place over three years ago and largely left things as they were. Since then, the industry has evolved. Millions of Canadians have invested in crypto. Institutional investors are still seeking out and funding projects. It's time for another look.Canadian governments, industry, and investors must work together to build a robust, equitable and sustainable Web3 economy. We need an environment that supports the growth of this industry while ensuring the sector remains accessible and inclusive to all Canadians.If we fail, Canadians could miss out on participating in the most important economic innovation in decades, and Canada could fall behind global competitors who are already working to harness the power of this technology.We know – and so do governments – that no matter what happens in the short term, blockchain will be a cornerstone of the future economy and we need to ensure that Canadians can participate and thrive in that economy. We need principles-based regulations that support cryptocurrencies.Morva Rohani is the Executive Director of the Canadian Web3 Council, a non-profit trade association founded by industry leaders in the blockchain and cryptocurrency sector, who are committed to working constructively with policymakers to help establish Canada as a leader in Web3 technology.