[Guest Post] Major Issues Canadians Face when trying to Invest in Crypto
by Justin Hartzman
Canada is emerging as a leader in the world of cryptocurrency. With crypto exchanges popping up in each major city, it is undeniable that Canadians are starting to embrace this new technology. However, there are two major hurdles facing interested investors when it comes to crypto: 1) the ongoing need for regulations and banking support, and 2) a serious lack of knowledge or access to educational resources.
The Regulatory Balancing Act
The Government of Canada, along with several key provinces, has been largely supportive of the crypto industry. This is a major reason why Canadian cryptocurrency ventures have been growing so rapidly. With the plan to follow other leading countries like Switzerland and Malta, financial authorities across Canada have promised to implement strict regulations to render more stability and trust in the market. However, passing regulations has proven to be quite the balancing act with all the powerful banking institutions on one side and the fear of missing out on this technological advancement on the other.
In fact, cryptocurrency has a transformational capacity. It has a tremendous and largely untapped potential to change all kinds of major operations in key ways. Crypto assets are traded over a special type of network called blockchain. Essentially, a blockchain network allows two or more parties to securely trade digital assets or information with each other without the need of a middleman. The implications of this are huge. Imagine being able to trade a rare digital good with anyone anywhere. This could include things like the digital keys to a car or a house to the distribution rights of music or a piece of art. Blockchain technology can make all of these transactions simpler, less time consuming, cheaper for everyone, and much more secure.
The decentralized nature of this technology, where middlemen like banks are no longer needed, stands out like an elephant in the room as far as regulation is concerned. Canadian regulators are struggling to implement rules to fight fraud without significantly hindering the creative potential of this technology. Regulators like the North American Securities Administrators Association (NASAA) and Canadian Securities Administrators (CSA) have respectively launched efforts in the past year to cleanse the crypto space of fraud attempts, and classify ICO tokens as securities. Even the Government of Canada planned to implement regulatory standards for crypto business in the Fall of 2018. However, due to a wide range of submissions claiming the standards are too strict for crypto to thrive, the plan has been delayed to 2019. The earliest this can go into effect is 2020.
Ultimately, the problem with delaying regulatory oversight regarding securities classification, taxation and fraud is that the market becomes more uncertain and volatile from an investment perspective, further hindering mass adoption. This environment acts as a negative feedback loop. Cryptocurrency companies are unable to build trust with banks or insurers, which continues to make the market more uncertain. Even investors who are curious about crypto may be hesitant to dive in until this space become more predictable.
Overcoming a Myopic Outlook
Another major hurdle that investors have to overcome when it comes to crypto is lack of knowledge and educational resources. Considering that Canada’s rapidly growing financial sector was ranked as the fourth highest contributor to GDP in 2017, it is important to realize that Toronto, Vancouver and Montreal are banking cities, not tech capitals. This directly influences how investors learn about cryptocurrencies and their potential uses. Looking at blockchain technology solely from a financial perspective is like buying a smartphone just to make phone calls.
From the kind of regulatory oversight being suggested by authorities to petty disputes between banks and exchanges, the conversation around crypto for the average Canadian investor hardly leaves the realm of finance. Resulting in a constant focus on market price and volatility rather than the quality of projects being launched or the fundamentals behind it. This is an extremely myopic perspective of a transformational technology.
In addition to taking a narrow focus on the technology, there is a major gap in the availability of credible educational resources. As with many new technologies, crypto and blockchain come with their own language and foundational principles, that are not easily comprehensible to everyone. Fortunately, major online educators like Lynda.com and Udemy are starting to offer workshops to provide hands on experience to crypto curious students, but there’s still a long road ahead to providing comprehensive learning tools and support for this ever evolving technology.
In the premature stages of cryptocurrency, it can be easy to ring the warning bells of a scam without doing more research. While not as common as mainstream media would like you to believe, it is possible to use this technology for nefarious purposes, which is why regulatory oversight is so crucial to stabilize markets, build trust for investors, and lead to the establishment of a credible cryptocurrency ecosystem. While regulations may take some time, you have the power now to start doing your own research. Find reputable sources to learn more about cryptocurrency and blockchain. Research the projects and coins that interest you. From there, you will have the ability to make your own discernments as an informed investor and help usher in this new technological wave.
Author BioJustin Hartzman heads CoinSmart as CEO and co-founder. He is a seasoned business leader and entrepreneur whose passion for innovation has seen him lead numerous companies from start-up to successful exit. His proven track record of entrepreneurial success includes founding the first website brokerage exclusively serving online businesses, pioneering the industry and achieving over $100M in transactions to Fortune 1000 companies, PE firms, family offices and venture funds. He has also led multiple fundraising rounds working with Canadian and U.S. Angel Investors and VCs.
In addition to leading CoinSmart, Justin is also co-founder of Needls, an Ontario-based company that uses Data Science to automate social media advertising processes for small to medium enterprises worldwide.