Category: Podcasts

Would you dig through your attic for an old hard drive if it had bitcoin on it? In this episode, we explore why Bitcoin and other cryptocurrencies have become so valuable and why Canadian investors are watching the space with interest. We take a look at new financial products being built around these cryptocurrencies now arriving on the scene – ETFs, futures contracts, trust funds, and new vehicles for investing in blockchain technologies. Find out why Canada could beat the United States in bringing regulated bitcoin products to market.

 

Our guests for this episode:

• Karsten Arend, President, Just In-Genius Inc.
• Karl Cheong, Head of ETFs, Canada (exerpt below)
• Shidan Gouran, President, Global Blockchain Technologies
• Elliott Johnson, Chief Operating Officer, Evolve ETFs

 

Views expressed do not necessarily represent those of Navigator or its affiliates. 

A portion of our discussion with Karl Cheong is transcribed below. Subscribe here to have the Navigator’s latest insights delivered right to your inbox.

Clare:  You had mentioned earlier that there are some challenges both here in Canada with the OSC and with the U.S. Securities and Exchange Commission looking at these Bitcoin ETFs and not sure what to do with them. Will we ever get to a point where there’s a real chance these products come to market and if they do what does that mean?

Karl: Yeah. So I do believe in every asset class I have ever seen whether it be gold or equities and real estate, if there is enough demand by the public it will be made available in some form. We’re already seeing some form of access to Bitcoin via over-the-counter trusts. Just because there is no Bitcoin available right now, there’s one in the U.S. I’m thinking of in particular G BTC that trades in the over the counter market. So it’s an exchange traded fund but it’s not exactly like an ETF in a sense that it trades at a 55 percent premium to the net asset value of the product because you cannot create in redeem shares. But if an investor wanted to go on an online account they can get access to the Bitcoin price by paying a huge premium to do so. And so that’s why I feel the ETF will make it far more efficient for the everyday investor to get access to a burgeoning asset class.

Now I would say though you know the timing is going to be a bit tricky. When I first started talking about this I thought it was going to be by summertime, given the demand and what we saw. And and we have filings that have been in the market place for over three years four years with the Winklevoss twins being the first to file. So I feel they’ve been working with regulators and they’re going to need to continue and educate and address these concerns. I would say it’s probably going to happen in the next three years. But that’s kind of … I don’t have the crystal ball. And obviously regulators will do the necessary homework they need to on this product. But as it becomes more of a utility in society and you see more companies accepting crypto currencies,  you’ll see others like you know Kodak, for example, they’re creating their coin that they can pay others and remittances in other areas. I feel this this whole blockchain and Bitcoin concept can really disrupt many and it becomes more everyday usage. You’ll see a product eventually.

Clare: Yes exactly. And you know what the regulators have been okay with, we saw back in February the OSC approved Canada’s first blockchain ETF. Is that a different way to go, is that is that a better way to go right now. And why do they think that’s a that’s a better product or a product that has less uncertainty than say a Bitcoin ETF.

Karl: So we also launched a Bitcoin ETF last Friday and so I expected less red tape with blockchain ETFs. There are several in the U.S., there’s a few here in Canada now because it’s investing in the underlying securities. And so I’ll give you a few examples of companies that we hold in our blockchain ETF that you wouldn’t necessarily affiliate blockchain with the name. We hold companies like IBM. IBM, if you go onto their website I’m sure you’ve heard of software as a service, you would see something on the website called blockchain as a service. So they’re enabling other companies to use the blockchain technology in the one example I’ll give you as they’re partnered up with Wal-Mart for a pilot case study on how to track food and produce. They have this one example regarding a bad crop of mangoes. Wal-Mart went through their normal processes to try to identify the farm it came from to avoid you know food recalls and borne illnesses for example. And it took them about six and a half days to actually track that down via phone calls and other methods that they traditionally have. Wal-Mart partnered up with blockchain and within a consortium and it’s really important to distinguish blockchain could either be public which is the crypto currencies or private and in this case it was a private blockchain, Wal-Mart had all its suppliers on this blockchain. There’s no mining or what not. Everyone knows who everyone is on this blockchain it’s just an open ledger that’s verified by one or two people. So in this case Wal-Mart entered into a bar called of the mangos and identified where that farm was within 30 seconds. Right. And so you can see the time in efficiency and cost that this technology can produce.

Over time it will be something like, I think like what we saw with cloud computing and Amazon. So very early on Amazon in 2011 started investing in the cloud. We all had high hopes that it would be a great business line for them. Today, fast forward web services is a significant part of their overall revenue and contributor to growth. So the way we have seen the blockchain ETF come to market because they’re playing it more pick and axe, you know think about like way back when in the 90s many people wanted access to the internet and the only company available for purchase was AOL right. And so you know I liken it to that period because right now you have certain blockchain companies that haven’t been a blockchain company for very long. They’ve changed their name in some cases to avoid getting delisted and some of them kind of very eerily reminiscent to the dot com era. And so with these products that are coming to market including ours of course, we are screening through and ensuring that you’re getting leverage to the blockchain exposure but we’re investing in infrastructure, in companies that have the resources to to build in this technology. RBC for example and Goldman Sachs that use this technology but you know it’s too early stages right now because there’s no one line item that shows blockchain revenue and that’s the challenge of creating portfolios so most of us are creating it via indirect exposure.

Everyone is talking about blockchain, but does anyone really know what it is? In this episode, we sit down with blockchain guru Don Tapscott, the co-author of Blockchain Revolution and co-founder of the Blockchain Research Institute to help us answer that key question and why Canada is at the heart of this emerging industry. Also, Don gives us a surprise update about his critically acclaimed bestseller.

A portion of our conversation with Don Tapscott is transcribed below. Subscribe here to have the Navigator’s latest insights delivered right to your inbox.

Clare: Let’s kick things off with a question on all of our listeners minds what is block chain?

Don: A block chain is just a technology to allow individuals and organizations to share information in a way that everybody can rely on the way the information is shared to be accurate. Mostly it’s a network in which get a lot of different people to agree on something when they might not necessarily trust each other.

Most people would say it’s a distributed ledger technology and we think of it quite differently, as the second era of the internet. For four decades we’ve had an Internet of information. But when I send you some information a PowerPoint or e-mail, I’m actually sending you a copy, even with a website I keep the original. When it comes to assets things of value like money, or stocks, or loyalty points, or carbon credits, or music, or art, or identity’s, or intellectual property, or you know votes which are now capital, value that belongs to somebody, sending a copy is a terrible idea. This has been called the double spend problem by cryptographers for a long time. And the problem got solved by an anonymous person or persons named Satoshi Nakamoto they came up with the bitcoin protocol. Bitcoin is an asset, a crypto currency, but what really makes it important to all of us is none of that. It’s the underlying blockchain technology.

For the first time ever now people can handle assets to transactions, communicate and manage them peer to peer and trust between people is not achieved by a big intermediary like a bank, government, credit card company, social media company, whatever. It has achieved by cryptography, by collaboration, and by clever code.

Clare: There are a few challenges still for blockchain adoption such as scalability and sustainability and there are many disagreements within development communities about these two topics. I read that bitcoin can process somewhere around 7 transactions per minute and Visa and Mastercard can obviously do thousands and thousands of transactions a second, so are we going to see a solution soon to that scalability challenge?

Don: Ironically speed is going to be one of the biggest benefits of blockchain not just in terms of number of transactions but speed from the financial industry. Think about it. You tap your card at Starbucks and a bunch of messages go through half a dozen companies each with ancient technology and then three days later clearing the settlement occurs where someone actually gets paid. Well ifall of that we’re based around a distributed ledger. There would be no three day settlement period because the payment in the settlement would be the same activity, just a change in the ledger.  So over time I think it’s inexorable that not just technology will get better but the payment system will move to blockchain. 

Navigator is introducing a new podcast series to talk about the advent of blockchain technology. Over the next 10 weeks, we will explore what this technology means for Canada and how it will position us on the global stage.

In this introductory episode, we talk about what listeners can expect to hear and learn through the series. It’s all about answering the fundamental questions about the technology, how it will disrupt traditional institutions, and bring a host of benefits to everyday Canadians.