Tread carefully when it comes to regulating digital currencies like Bitcoin – that’s the advice of Canada’s Standing Senate Committee on Banking, Trade and Commerce after a 14-month study of digital currency.
Released just as Parliament is riding ahead of the scheduled October federal election, the Senate committee released its report on Friday. Over 14 months the committee heard from 55 witnesses, including civil servants, law enforcement agencies, the financial services sector, digital currency-related businesses and payment card operators.
“We believe that the best way to move forward with digital currencies is to monitor the technologies, particularly cryptocurrencies, as they evolve, while government organizations, such as Canada Revenue Agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and police services continue learning to navigate and use blockchain technology,” said Senator Irving Gerstein, the committee chair, in a statement. “These new technologies may have innovative and as-yet unimagined applications and are at a delicate stage in their development and use. We must tread carefully when contemplating regulations that might restrict and stifle their potential.”
The committee does recognize the potential for digital currencies to be used for tax evasion, money laundering, and terrorist financing, and recommends the government require digital currency exchanges to follow the same requirements as any other money services business with regards to anti-money laundering and anti-terrorist financing measures.
Senators were bullish on the blockchain technology that underpins digital currencies such as Bitcoin, saying it could help bring financial services to the one-third of the world’s population that doesn’t have access to traditional banking services, could allow more secure financial transactions by putting one’s security and online identity into their own hands, reduce the cost of financial services and help governments increase the security of the private information they hold.
“Cryptocurrencies are so much more than just virtual cash – they’re the force behind a new way of interacting over the internet,” said Senator Céline Hervieux-Payette, the Committee’s Deputy Chair. “An increasing number of organizations – including Microsoft, Dell, Amazon, Home Depot, Subway and Simon Fraser University – have embraced digital currency. The Banking Committee is confident that the implementation of our recommendations will have positive outcomes for consumers, merchants, digital currency-related businesses, Canada’s financial services sector and others.”
The committee report makes eight specific recommendations, including that the federal government consider using blockchain technology to more securely deliver government services, that digital currency exchanges to meet the same requirements as money services businesses, that the federal government work with other countries to develop global guidelines for digital currencies, and that the Canada Revenue Agency remind Canadians about the tax obligations associated with digital currencies.