The Canadian Senate Wants Canada To Be A Bitcoin Utopia

A Senate committee has fallen head over heels for cryptocurrencies.

Bitcoin, an online cryptocurrency you can use to have weed delivered to you in the mail, was recently studied by the Canadian Senate's banking committee.

Jim Urquhart / Reuters

You might expect a group of senators with the average age of 66 to be leery of Bitcoin. The digital currency is widely associated with, shall we say, off-the-books purchases. Because payments are tied to a digital ledger outside the reach of any government, they've lead to the creation of online black markets like the now-defunct Silk Road that police say have been used to launder billions of dollars in cash.

But nope, they love it.

Their report calls Bitcoin "among the most notable developments in recent history" and urges Canada to become an online currency hub.

Jurisdictions ranging from New York to Quebec have attempted to regulate Bitcoin, but the Senate warns Canada against this. Instead Ottawa should take "a light regulatory touch — almost a hands off approach" so as not to stifle innovation.

Then the senators go even further, recommending even the Canada Revenue Agency start using Bitcoin-style technology

Benoit Tessier / Reuters

The committee notes that in recent years hackers have targeted government databases, including those at the Canada Revenue Agency. The proposed solution: replace them with Bitcoin-style transfers.

"In our view, compared to centralized databases, blockchain technology [the underlying structure of Bitcoin] may provide a more secure way to manage information," says the report.

This raises several questions. Among them, how would the tax system work without databases? How would the government know if people are paying the proper taxes when commercial transactions can be made anonymous? How would you prevent tax evasion and money laundering?

The Senate report didn't fully answer these questions but did offer one piece of advice: tell people not to cheat on their taxes.

Mark Blinch / Reuters

One of the eight recommendations is for the government to "provide concise information to Canadians about the tax obligations of digital currencies" when it's used to buy things.

Of course, some of the 55 witnesses the senators talked to had concerns. The RCMP and the Department of Finance were amongst those warning that cryptocurrencies could lead to crimes including terrorist financing.

However, the spy agency CSIS said it has seen no evidence of terrorist groups using Bitcoin and is not overly concerned about it as a national security threat.

Ultimately the committee was won over by the potential of cryptocurrencies as a cheap and secure method of payment. The Senate is not alone in their enthusiasm for Bitcoin, which has many champions ranging from libertarians to venture capitalists.

Fewer than 200 businesses in Canada accept Bitcoin right now, most of which are online businesses, according to the Department of Finance. Banks also aren't having anything to do with it. But the Senate committee wants the government to push big banks to get on board and start integrating with Bitcoin.

That will be a tough sell since one of the perks of cryptocurrencies is they allow you to avoid banking fees.

Speaking of fees...

Jim Urquhart / Reuters

At the same time the committee was embracing the potential of Bitcoin they voted to kill a bill that would have reined in credit card fees.

Canada is one of the few western countries not to regulate fees charged to merchants when they sell you something. In some cases retailers have to eat up to 3% of sales and flip that money to Visa or Mastercard. Credit card companies rake in $5 billion per year on merchant fees in Canada.

Bill S-202 would have regulated these fees. But the banking committee took a over year to finish its study of the bill then gave it the thumbs down. The bill will be wiped away when the election is called later this year.

You never really know what to expect from Senate committees. Recently the committee on national security and defence made waves by recommending Imams should be registered in order to fight the spread of terrorism.