Despite recent declines in Bitcoin prices and increasing government regulatory attention to cryptocurrency trading in general in Canada, one company remains so bullish on the sector that it has announced a new trading platform dedicated to such alternative currencies.
The firm, which dubs its new platform CoinSeason, said it is bullish on the long-term potential of cryptocurrencies like Bitcoin because it envisions the platform becoming a place where investors can freely buy and sell such currencies using official “fiat” currencies (those declared as legal tender by a government) such as the Canadian and U.S. dollars and the Chinese yuan (renminbi).
“When I got into this industry, I noticed that many Canadian exchanges either don’t have a portal for a user to buy/sell bitcoins or they don’t have a market for [other] altcoins,” said CoinSeason Capital Inc. chief operating officer Jack Wang. “That’s when it occurred to me; why not build a platform that can do both? So, we combined the fiat market with the altcoin market to provide end-to-end service so that no matter what type of client you are, we can always fulfill your needs on this platform.”
The long-term view for CoinSeason organizers is ambitious; officials say they will launch a mobile app at the end of the year and envision the platform to eventually not only handle currency trading, but also gaining the ability to store currency, issue loans, support entrepreneurship and even serve as a conduit for e-commerce purchases cross international borders.
CoinSeason CEO William Wang said the company is largely supported by local Chinese-Canadians and some investors from China, but he added that it is trying to gain the trust of mainstream investors through registration with FINTRAC and implementation of anti-money-laundering procedures.
“We’ve been working through many challenges to get to where we are today,” Wang said, noting the platform has already been undergoing preliminary testing for eight months, with total transactions valuing around US$20 million. “We’ve seen a lot of support from the Chinese community here and from people from China, who are very interested in what we are doing. But while most of our support is currently from the Chinese community, we want others to join us and help us in the future…. Our goal is to get more Vancouver brands onto the global scene.”
In addition to Bitcoin and mainstream currencies, CoinSeason supports several other altcoins - Ethereum, Ripple, Bitcoin Cash and Litecoin. The company says it will review 20 other currencies, and plans to support 50 different alternative currencies, or “altcoins,” by the end of the year.
Ottawa has stepped up regulation of cryptocurrencies recently. A statement earlier this month from the Department of Finance Canada suggested that such currencies will be treated as money service businesses (MSBs), which would make it necessary to report trades above $10,000, among other requirements.
The regulations reflect increasing scrutiny on the safety of the currency, both in terms of price volatility and security of investment. On June 20, South Korean exchange Bithumb said 35 billion won worth of cryptocurrencies (or $42 million) were stolen by hackers, prompting the exchange to stop all trades. Another hack in South Korea caused the loss of another US$40 million ($53 million) in cryptocurrencies at another exchange.
Bitcoin has fell sharply against the U.S. dollar since May, falling from 9,927.34 on May 5 to 6,565.54 on June 20. A study from the University of Texas this month claimed that a significant portion of Bitcoin’s spike in 2017 was due to a coordinated price manipulation using another cryptocurrency to inflate Bitcoin prices.
Speaking at the CoinSeason launch event, Stephen P. Robertson, a partner at Borden Ladner Gervais (BLG) – the company’s law firm – described the current period as a “growing pain phase” for cryptocurrencies. Robertson said several regions have continued to ban or limit the use of cryptocurrencies, and Canadian regulators are attempting to catch up to the rapidly moving sector.
“They are concerned people are going to be going out and investing money into something they are not aware of and is not otherwise regulated to some degree,” Robertson said. “There’s concern that people will be doing that and losing money when they are not really aware of the risk involved…. The big question they ask is, is cryptocurrency a security? What we’ve been helping our clients to do is to go to the securities commissions and have those conversations and say, ‘This coin that’s being issued, it has a utility. It has a purpose to it, and it does not have a return-on-profit….’ We don’t think it’s a security.”
Despite all the scrutiny, cryptocurrencies remain the most popular inquiry topic for BLG’s clients and potential clients, Robertson said, adding that the regulatory landscape will likely change again by the end of the year.
“[Regulators] are open to conversations, but they are still trying to fit an old system around a brand new world, and I fully expect we haven’t seen the end of regulation.”
Manie Eagar, chairman of the Blockchain Association of Canada, said it is now more important than ever for “good players” to join the cryptocurrency game because public trust is key to “the future” of currency trading. Eagar said a Bitcoin event at New York’s recent Consensus 2018 conference drew 8,500 people, highlighting the momentum of the sector despite the scrutiny.
“At the end of the day, it’s about good behaviour,” Eagar said. “It’s about people trusting actors such as CoinSeason that have worked with their lawyers and the regulators, engaging with investors and paving a way forward…. The bad news is that we are going to have to deal and knuckle down with the regulators. It has put on a bit of a dampener on the market, but the good news is that large industrial, institutional bank trading desks and so forth are all starting to look at this space. They want to come onboard, and it’s not just because it’s a new asset class with an incredible return on investment.”