Canada Markets closed

Bitcoin believers say future is bright for digital currency in Canada

Darah Hansen
Bitcoin believers say future is bright for digital currency in Canada
Bitcoin believers say future is bright for digital currency in Canada

It’s no secret bitcoin’s reputation has taken a beating thanks to online gamblers and money launderers, not to mention high-profile hacking scandals and business boondoggles that have left investors penniless.

But believers in the digital currency say the bad times are behind them, and, in Canada, the future is looking brighter than ever.

“Bitcoin is making a comeback,” says Joseph David, CEO of Calgary-based Cavirtex, Canada’s largest bitcoin exchange.

David spoke to Yahoo Canada Finance on a recent visit to Toronto where Cavirtex is the first-ever bitcoin representative at the World Money Show, taking a table alongside established bankers, traders and investors.

In the months since the painful collapse of Mt. Gox, the world’s largest bitcoin exchange, crypto currency believers have been fighting to convince the world of the currency’s legitimacy.

Tokyo-based Mt. Gox filed for bankruptcy in February, following the disappearance of nearly US$500 million, apparently at the hands of hackers. It was the second time the exchange was robbed, according to Wired magazine. Another US$8.75 million was stolen in 2011.

Unease stirred up in the wake of that fiasco depleted bitcoin volumes at exchanges worldwide, including Cavitrex. At the same time, public interest also faded.

The virtual currency’s is only now showing signs of rallying. Buyers are looking at prices of about C$450 for a single bitcoin, up from lows of about $300 in early October, said David.

Prior to the Mt. Gox collapse, the price of a bitcoin had soared to highs of more than $1100.

Business interest has also returned, with the likes of Dell and Expedia jumping onboard the list of (mainly online) retailers that are now accepting bitcoin as a form of payment.

Bitcoin, which emerged on the global scene in 2009, is marketed as a kind of currency without borders. It’s available to anyone with the money to pay for it and a mobile phone.

Unlike traditional currencies, bitcoin is not regulated by a central bank. Its value is tied to the demand applied by buyers and sellers.

Advocates like David see bitcoin as a disruptive technology that has the potential to replace cash, possibly within the next decade.

Bitcoin transactions are fast even by mobile-payment standards, have no transaction fees and allow users to easily move money around the world (a particularly attractive characteristic to users in countries where government restrictions limit international monetary transfers).

Should you jump on the bitcoin bandwagon?

Yet, even in Canada, where tech-savvy residents are showing steady interest in the bitcoin trend, overall adoption of the currency remains low.

Ning (Tony) Tang, a finance professor at Wilfrid Laurier University, believes there is still no real advantage to everyday consumers to spend bitcoins as they would regular currency.

Tang said ongoing security problems, combined with uncertain regulatory rules, force consumers to assume too much risk.

Credit cards and other forms of mobile payments are still more palatable to people who are looking to be protected from cyber theft. Many credit cards also offer attractive rebates, cash-back options and air miles.

Tang is currently conducting research that will measure the actual number of consumer transactions using bitcoins in Canada. No such data exists to date.

Right now, he said, it appears bitcoins best adopters are high-risk investors who are buying and holding on the belief the value will increase.

American consumers have shown the highest interest in bitcoin use, followed by Canada, China and various European countries.

In Canada, bitcoin ATMs are being installed to allow users to easily buy and sell the digital currency.

David is confident Canada’s bitcoin community will grow, but said Canadians need more information on what a bitcoin actually is and how the system works.

“It’s a learning curve,” he acknowledged.