Network, Novelty, or Threat?


Bitcoin, and other emerging digital or crypto-currencies, are examples of an early wave of a technology, in this case, an open source, peer-to-peer software, that allows users to generate (“mine”) bitcoins; these bitcoins can then be used to facilitate online transactions, maintaining a user’s anonymity and undertaking transactions without the backing of a centralized bank or entity.

Bitcoin was the first digital system that offered users the capacity to store and exchange value in a decentralized transfer, without any fees being charged.

A relatively new technology that is being compared to the emergence of the commercialized internet in the 1990s, bitcoins are primarily used by bitcoin enthusiasts, those who are keen to adopt technology in its infancy, and those who use bitcoins for investment purposes. A recent controversy has emerged as the result of increasing speculation which has greatly contributed to the fluctuating value of bitcoin as of late.

Bitcoin and other crypto-currencies have not yet fully realized their potential as a legitimate means for online payment, but many companies, primarily online businesses, have started accepting them and have experienced good customer feedback and a positive return.

Bitcoin could also serve as a safe and seamless way to transfer money across the world, without the fees typically charged for these services. Bitcoin and associated technologies could serve as a stepping stone to a truly global financial market – if only it had a greater operating capacity.

Since the inception of bitcoin, there have been thousands of start-up companies emerging, with millions of dollars being contributed by outside investors. Bitcoin has not only attracted the attention of adoring fans but also that of sceptics. Many people, including a number of government officials, believe that bitcoin could easily facilitate tax evasion and money laundering activities, and increase the potential for illegal activities online. Bitcoins have been identified as an emerging risk, and although many governments have chosen not to regulate them in the past, it is increasingly becoming the trend.

Some mainstream scrutiny has come as a result of the recent bankruptcy proceedings of Mt. Gox, a bitcoin exchange located in Japan. Mt. Gox filed for bankruptcy protection in the U.S. to temporarily halt legal action after “losing” an estimated 850 000 bitcoins to hackers, as well as $28 million from their Japanese bank account. Some of those missing bitcoins have since been found, furthering the investigation into Mt. Gox and its proprietors.

Canada has maintained a hands-off approach with bitcoin in the past with transactions less than $3000, and served as a hub for bitcoin businesses and enthusiasts alike until recently, when the federal budget was delivered by the late Hon. Jim Flaherty, declaring bitcoin virtual money and preparing to regulate this new currency to ensure that it complied with the provisions of Canada’s anti-money laundering and anti-terrorism financing regulations. Canadian laws pertaining to bitcoin will be developed by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and must be balanced in their approach to ensure that they do not deny Canadians access to bitcoin and associated markets and do not force bitcoin users and processes underground.

For bitcoin enthusiasts, the technology is here to stay, and it will be how many business transactions are done in the future. The increasing popularity of bitcoin, however, could exceed its intended capacity as the number of currency units is capped at 21 billion in circulation (approximately $1.3 billion), regulated by Bitcoin Foundation.

In order for bitcoin to achieve global acceptance, two major advances would need to be made. The current process of mining bitcoins and processing bitcoin transactions is time consuming and would need to be overhauled to service the pace of the global economy. The second major advancement required for bitcoin to establish itself globally poses a particular challenge, in that increased transparency is required to operate across borders as a financial tool – but transparency is actually a qualifying trait of bitcoin that is partially responsible for its early rise to popularity.

Many bitcoin companies, a contingent that continues to grow, would welcome greater consistency in the environment in which they operate. The idea of one global license has been discussed, with many companies agreeing that a consistent regulatory framework to operate within would be paramount to success. A clear framework would alleviate significant rational and financial burdens, allowing many business owners to focus less on red tape and more on the tech side of their businesses.

The rise of bitcoin’s global popularity is clear in the bitcoin ATMs that are springing up worldwide. A bitcoin ATM recently opened in Vancouver, B.C., where people can buy/sell up to $3000 bitcoin a day, monitored by a Biometric sensor to ensure there are no repeat transactions in the same day – $3000 being the magic number keeping Canadian regulators and tax officials at bay. As the currency’s popularity grows, so too does the watchful eye from governments and banks around the world. There are the proponents who believe that without the backing of the big banks, bitcoin will have no future as a result of not being able to convert bitcoins into fiat money easily. Of the big banks, BMO has stated that if bitcoin was regulated, that it could be interested in the currency; RBC, on the other hand, is not interested. China has denounced bitcoin and other crypto-currencies as illiquid and is not likely to accept the technology any time soon.

Bitcoin’s volatility has been compared to gold, in that it has few uses outside of investment purposes. Over half of bitcoins spent were exchanged through Satoshi Dice, a supported gambling service, furthering the speculation and volatility of the crypto-currency.

In addition to its volatility, there exists a misconception that bitcoin will overtake money; but bitcoin was not developed with the intention to do so. As bitcoin grows in popularity it would be beneficial for banks to find a way to welcome bitcoin technology to innovate the financial services they offer.

Regardless of the divided public perception of bitcoin and the many pros and cons to adopting such a technology, bitcoin is a new technology that shows significant promise. Start-ups continue to emerge on the market and there is certainly more room to grow with significant investment opportunities available. It should be noted that the appeal of bitcoin and other crypto-currencies may fade with increased regulation as digital currencies thrive on the ability to freely transfer wealth anonymously, outside of external intervention. It does seem, however, that continued growth would require additional regulation to accommodate the scope of bitcoin’s global expansion, even though many start-ups flourished during the unregulated period.

As for the criticisms, bitcoin enthusiasts attribute those to growing pains akin to the internet just a couple of decades earlier. Illegal activity has the potential to impact on any process or system that can be capitalized upon, so denying bitcoin’s development on that premise would be flawed, and it is likely that the potential of bitcoin would be missed – whether it is being used as a currency, a wealth transfer system, an online payment option, or simply as a novelty to be enjoyed.

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June 19, 2018, 8:16 AM EDT

A Proactive Approach to Resolving a Longstanding Debate

About forty skilled Central and South American workers from Ecuador, Peru, Columbia and Costa Rica came to British Columbia, Canada as temporary foreign workers (TFWs) in 2006. This story incited Labourers’ International Union of North America (LiUNA) call for reforms to Canada’s TFW program (TFWP) and the International Mobility Program (IMP). LiUNA, a powerful voice within the construction industry with over half a million members – 110,000 of whom are in Canada – has been the only Canadian union to address the issue.