Is There Hope for Canada’s Crypto Sector After the Election?

The recent Canadian election has left the crypto community questioning the future of cryptocurrencies in the country. With the Liberal Party, led by Mark Carney, securing victory, what does this mean for Canada’s aspirations to become a “blockchain capital”?

• Conservatives advocate for crypto as an inflation hedge.
• Liberals prefer CBDCs, skeptical of Bitcoin’s volatility.
• Poilievre aims to make Canada the “blockchain capital.”
• Bill C-249, a crypto regulation framework, was defeated.
• Trump’s influence swayed older voters to support Carney.

The Canadian election of 2023 was shaped by a variety of issues, from inflation and housing costs to the surprising influence of former U.S. President Donald Trump’s rhetoric. But for those in the crypto community, the real question is what this election means for the future of digital currencies in Canada.

The Election Context

The election came at a time of economic uncertainty, with inflation and housing prices dominating public concerns. The resignation of Justin Trudeau and the subsequent leadership race set the stage for a contentious battle between the Liberals, led by Mark Carney, and the Conservatives, under Pierre Poilievre. Amidst these traditional issues, cryptocurrencies emerged as a significant point of contention.

Conservative Party’s Crypto Vision

Pierre Poilievre and the Conservative Party have been vocal proponents of cryptocurrencies. They view digital assets as a way for Canadians to protect their savings from the rising prices that inflation brings. Poilievre’s ambitious vision is to transform Canada into the “blockchain capital of the world.” This would involve reclassifying cryptocurrencies from securities to commodities, a change that could potentially spur innovation and investment in the sector. Poilievre has even used the Bitcoin Lightning Network for transactions, showcasing his commitment to these technologies.

However, recent statements from the Conservative Party suggest a more cautious approach. They may be toning down their crypto rhetoric to appeal to a broader voter base, as crypto is not a priority for most Canadians according to Morva Rohani, executive director of the Canadian Web3 Council.

Liberal Party’s Stance on CBDCs

On the other hand, the Liberal Party, now led by Mark Carney, has taken a more skeptical view of cryptocurrencies. With his background as a central banker, Carney prefers central bank digital currencies (CBDCs, which are digital versions of a country’s fiat currency issued and backed by the central bank). He and his party believe CBDCs offer better regulatory control and stability compared to the volatility of Bitcoin.

Chrystia Freeland, the former Finance Minister, criticized Poilievre’s advice to invest in crypto:

“Let’s talk about some really terrible advice that was offered to Canadians in the spring by the Conservative leader. He urged Canadians to invest in crypto as a way to opt out of inflation. Now, bitcoin has crashed by 21 percent over the past week and by more than 65 percent since the Conservative leader first gave Canadians that reckless advice.”

The Liberals’ preference for CBDCs aligns with global trends, though some countries are pulling back from their projects, which could influence Canada’s approach. The irony of central bankers advocating for more centralized financial systems while contributing to economic inequality, as noted by Forbes contributor Roger Huang, adds another layer to this debate.

The Role of External Influences

Donald Trump’s remarks about turning Canada into the 51st state of America played a significant role in the election, particularly among older voters who saw Carney as the best defense against U.S. influence. Carney acknowledged this sentiment, stating:

“We are over the shock of the American betrayal, but we should never forget the lessons.”

Meanwhile, Trump’s comments about having a “great relationship” with Carney further complicated the political landscape. This external influence, though not directly related to crypto, underscores the broader geopolitical dynamics at play in Canadian politics.

The Fate of Bill C-249

Despite the Conservative Party’s enthusiasm, their efforts to push forward crypto-friendly legislation faced setbacks. Michelle Rempel Garner’s Bill C-249, which aimed to establish a legal framework for crypto regulation, was defeated in its second reading. This bill was seen as a potential game-changer, offering a pathway for the crypto sector to thrive under a more defined regulatory environment.

The defeat of Bill C-249 highlights the challenges in gaining legislative support for cryptocurrency initiatives in Canada. It also underscores the regulatory hurdles, such as the classification of fiat-backed stablecoins as securities, which need to be addressed for the sector to grow.

The Road Ahead for Canadian Crypto

With Carney at the helm, the crypto sector in Canada faces an uphill battle. The Liberals’ preference for CBDCs and their skepticism about Bitcoin’s capacity and volatility suggest a challenging road ahead for crypto advocates. Yet, the global context of CBDCs is mixed, with some countries reconsidering their approaches, which might influence Carney’s policies in the future.

Dean Skurka, CEO of WonderFi, sees potential for a reset in crypto policy following Trudeau’s departure, suggesting that a Conservative government might be more open to engaging with the crypto industry. Meanwhile, Sophia Cote, head of policy at Shakepay, believes that crypto can address major policy challenges like affordability.

As the crypto community in Canada navigates this new political landscape, it’s clear that education and advocacy will be crucial. Public sentiment towards cryptocurrencies remains mixed, and shifting perceptions will require a concerted effort from industry leaders and policymakers alike.

Key Takeaways and Questions

• What is the Conservative Party’s stance on cryptocurrencies?

  The Conservative Party, led by Pierre Poilievre, sees cryptocurrencies as a way to combat inflation and aims to transform Canada into a “blockchain capital” by changing the legal classification of cryptocurrencies from securities to commodities.

• How does the Liberal Party view cryptocurrencies?

  The Liberal Party, under Prime Minister Mark Carney, is skeptical of cryptocurrencies. They view them as too volatile and prefer central bank digital currencies (CBDCs) due to their regulatory control.

• What was the impact of Donald Trump’s influence on the Canadian election?

  Trump’s influence swayed older voters to support the Liberal Party, as they saw Mark Carney as the best candidate to protect Canada’s interests against U.S. influence.

• What is Bill C-249, and what was its fate?

  Bill C-249 was introduced by Michelle Rempel Garner to establish a legal framework for crypto regulation in Canada. It aimed to ease entry into the sector but was ultimately defeated in its second reading in the House of Commons.

• What challenges does the crypto sector in Canada face under the new Liberal government?

  Under the Liberal government led by Mark Carney, the crypto sector faces significant challenges due to the party’s skepticism towards cryptocurrencies. The Liberals’ preference for CBDCs and skepticism about Bitcoin’s capacity and volatility indicate an uphill battle for crypto advocates in the coming years.