Thanks to Vitalik Buterin, full time Bitcoin writer and developer, for his contributions to this post.

The Canadian Bitcoin community has come far in the past six months. Earlier this year, all that Canada had to show in the Bitcoin world was a few restaurants accepting Bitcoins in Vancouver and Edmonton, two exchanges and Meetup groups of less than 10 people a month. Now, we have a fully-fledged 1400-square-meter Bitcoin embassy (i.e. a startup incubator dedicated to all things Bitcoin) in Montreal and Toronto recently celebrated the launch of the Vault of Satoshi’s Bitcoin exchange as well as Coinkite, a full service Bitcoin bank. This week, a Bitcoin ATM launched in Vancouver. To top it off, the Bitcoin Alliance of Canada will be making its official launch this month.

“The US – and particularly individual states like New York and California – have been unclear and unsupportive of digital currency,” says Michael Terpin, co-founder of BitAngels, a new network of angel investors launched this past May. Terpin will be in Toronto and Waterloo on November 4 to help highlight Bitcoin related startup opportunities.

“This is undoubtedly the reason that Robocoin unveils the first Bitcoin ATM in Vancouver and not in its hometown of Las Vegas,” added Terpin. “Canada can become the country that encourages Bitcoin innovation through the usual business development tools of tax credits, cutting red tape and in the case of Bitcoins, defining capital gains treatment. That could turn Vancouver, Ottawa, Montreal and Toronto into new hubs of digital currency startups.”

Terpin is growing a powerful network of investors within the wave of digital currency startups. “It’s reminiscent of the early days of the Internet in 1994 when Yahoo!, Earthlink and Netscape were formed and of social media in 2002, when LinkedIn and Friendster launched,” he says.

A mere year ago, it was virtually impossible to buy a Bitcoin without executing a wire transfer outside of the US and hoping you received your Bitcoins in return.  Launched in May, BitAngels is approaching 300 members, has soft commitments of more than $25-million in startup capital and has identified more than 100 startup opportunities. It has either funded or is in the process of due diligence for about a dozen of these companies.

Germany has become the first country in the world to officially recognize and define Bitcoins as a financial instrument in the German Banking Code. A move like this by Canada would set clear cut rules and standards to apply to Bitcoin startups and remove a great deal of the regulatory uncertainty. This would open the taps to American venture capital, eager to get early mover advantage while the various states and Federal regulatory authorities get their act together across the United States.

The universities of Toronto and Waterloo are renowned worldwide for their advanced computer science programs, making them the perfect ground for finding employees to work in the Bitcoin space. Much like Stanford is in many ways the epicenter of Silicon Valley, Toronto and Waterloo can support the burgeoning digital currency startup community in southern Ontario. It remains to be seen if Toronto’s core banking and finance communities will help or impede this ambition.

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