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July 21, 2015
Adoption & community

Canada’s Shifting Economic and Political Climate May Affect Bitcoin Exchanges’ Plans

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  3. Canada’s Shifting Economic and Political Climate May Affect Bitcoin Exchanges’ Plans
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The Bank of Canada has confirmed that, after two quarters of negative growth, the Canadian economy is technically in a recession although the bank would prefer to call it a “mild contraction.” The dollar is at a six-year low, mainly due to the falling price of oil and gas.

There have been persistent rumors for some time here that New York-based digital currencies exchange Coinbase is planning to expand into the Canadian market.

One of the largest exchanges in the world, and a benchmark for the NYSE’s bitcoin index NYXBT, Coinbase was named one of the 50 “Smart companies” of 2015 by MIT Technology Review.

When Bitcoin Magazine asked Coinbase’s International Expansion Head Sam Rosenblum to comment on the speculation, he would say only:

“Thanks for thinking of Coinbase… While we currently operate in 25 countries around the world, Canada is unfortunately not one of them.  We certainly hope to launch our operations in Canada sooner rather than later.”

You may think Rosenblum is being coy, but he, along with other potential investors, may very well be reassessing the Canadian market in light of new economic realities and a sea change at the federal government level as every poll indicates the socialist New Democratic Party (NDP) will likely win the upcoming election.

The oil-dependent province of Alberta stunned the country earlier this year by electing the leftist New Democratic Party at the provincial level, the first time in its history.

Two things about the NDP: It loves to regulate, and it plans to abolish the Senate, whose report on regulating digital currencies will likely be ignored, if not actively flouted.

This may have given pause to any investment plans on the part of Coinbase.

QuadrigaCX currently dominates the Canadian market

For a small country, Canada has its share of digital currency exchanges with home-grown QuadrigaCX dominating the market with a majority market share.

Cointrader, Coinsetter (CAVirtex) and Kraken, along with a number of smaller exchanges such as CoinSquare are in competition for the remaining market share.

“The company recently acquired CaVirtex and plans to lead the Canadian Bitcoin exchanges in the country,” Coinsetter CEO Jaron Lukasiewicz said in an interview with Bitcoinist. “Coinsetter’s exchange offers deep liquidity and attractive pricing, low latency trade execution and enterprise Bitcoin security making it a leader in the industry.”

Christine Duhaime, Executive Director of the Canadian Digital Finance Institute, thinks that whatever happens in the coming months, QuardigaCX will likely be left standing when the dust settles.

Duhaime notes: ”What I know about them [QuadrigaCX] is that they run their fiscal operations conservatively and grow organically with their own revenues so they are likely to have staying power in the long term”.

Virgile Rostand, CEO of one of the smaller exchanges, CoinSquare, is watching with interest and told us:

“The Canadian Bitcoin landscape is certainly evolving rapidly, and this will benefit bitcoin users all across the country tremendously by bringing down the service fees and by increasing the level of service that Canadians should expect from their exchanges. As with all emerging markets, successes and failures will depend on how well a company can bring innovation into the market while keeping their operations viable.”

Back into regulatory uncertainty

The Conservative government has been cautious about regulating digital currency businesses, referring the issue to the Senate for study. As reported by Bitcoin Magazine, the Senate called for a hands-off approach to regulation in order to give new financial technology innovation room to grow and prosper.

At this point, the Canadian government would normally respond, but the Conservative party is fighting for its life in the current election campaign, and regulations for digital currencies is the last thing on their minds.

This leaves things in flux, and the fact that the province of Quebec has brought in it’s own regulations requiring licensing for bitcoin trading platforms, means more rather than less uncertainty for digital currency businesses in Canada.

Amber D. Scott, CEO of Outlier Solutions notes that, at least for now,

“The obligations that are placed on exchanges (security, compliance, etc.) are probably the least complex that they will ever be in Canada right now. Lower-cost business creation and launch is possible (at least for now)… The winners will be those that are able to leverage their resources well to meet these obligations, while simultaneously keeping up with end user demands in an era of uncertainty.”