THE BLOG

Canada's New Digital Divide: The Digital Currency Challenge

11/21/2013 02:49 EST | Updated 01/23/2014 06:58 EST

Co-authored by Vitalik Buterin, full time bitcoin writer and developer.

"Keep in mind that the digerati are using the learning tools built into the Net to get smarter, faster. A new Net tool can propagate to millions in just a week or two. Unlike the old digital divide, this means that the divide between the digerati and the rest of the world is accelerating." The New Digital Divide, Seth Godin, May 7, 2005

Canada has an adoption problem. During the recent launch of their Canada digital adoption campaign, CATAAlliance, Canada's largest high tech association, and the Information and Communications Technology Council (ICTC) report that Canada's percentage of workers in skilled occupations ranked 12th out of 18 countries surveyed in a new OECD Report.

Now the emergence of Bitcoin, a digital currency launched in 2009, raises the question: Will Canada's core banking and finance communities hustle to embrace a trend that Marc Andreessen compares to the emergence of the early Internet or will they lobby governments to slow Canadian adoption?

Perhaps the answer was on display Tuesday night as RBC Capital Markets hosted a Toronto meeting of the Financial Information Services Division (FISD) of the Washington, D.C.-based Software and Information Industry Association (SIIA). FISD members include more than 160 of the world's most recognizable banks, exchanges and related service providers, including Scotia Capital, Manulife, CIBC World Markets and BMO Bank of Montreal. The center piece of the program was a briefing on the emergence of Bitcoin by Bitcoin Alliance of Canada's (BAC) Executive Director, Anthony Di Iorio.

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-metre 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. Two weeks ago, a Bitcoin ATM launched in Vancouver. To top it off, the BAC will be making its official launch this month.

"The US -- and particularly individual states like NY 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. "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 North America and hoping you received your Bitcoins in return. Launched in May, BitAngels has attracted almost 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.

At the FISD holiday party after the official program, it was tough to draw a conclusion about the possible adoption of bitcoin by Canada's finance establishment. As Canadians mixed with their colleagues in from New York and D.C., some admitted to never having heard of bitcoins before, while others admitted to personally owning some. Both were equally unashamed of their status.

Disclosures:

In 2012, I was appointed National VP of Startup Advocacy, for a CATAAlliance related campaign.

My company hosted Michael Terpin in Waterloo and Toronto on November 4, in collaboration with the National Angel Capital Organisation, Communitech, Aird & Berlis and Startup Grind Toronto, to help highlight Bitcoin related startup opportunities.