Bitcoin Beckons Questions

Cryptocurrency thrives in Canada, but what does it mean?

Banks create money when they loan it out. Sounds hard to believe, but it’s true.

According to the Bank of Canada, “Commercial banks and other financial institutions provide most of the assets used as money through loans made to individuals and businesses. In that sense, financial institutions create, or can create money.”

In other words, there’s no cash behind that cheque the bank gave you to buy a house. Nothing actually, not until you borrow it.

It’s complicated but not a secret and has been going on for years. But it begs the question: how does something invented in a bank ledger raise buildings and excavate mining pits?

Many Bitcoin enthusiasts will tell you that the whole monetary system is a sham. It’s not, but it’s easy to understand why they would say that when Canada’s big banks made nearly $30 billion in profit last year in the face of record household, provincial, and federal debt. 

The solution, funnily enough, is a ledger, say bitcoiners. That’s what Bitcoins are, just a record in a ledger. Understanding Bitcoin is only slightly easier than understanding how banks create money by loaning it out. It’s hard to believe that either is entirely on the up and up, but somehow both appear to be.

One tidy difference: When banks create money in a ledger, it comes with interest. When Bitcoin does it, it doesn’t.

The Bitcoin ledger is shared around the world, updated regularly, and transparent. It’s like an email that gets sent out saying, “Digital Wallet X gave Digital Wallet Y 5O Bitcoins, so these are Y’s Bitcoins now.” 

That exchange can be done directly—allowing bitcoiners to avoiding those troublesome Western Union remittance fees—or through third parties with access to your Bitcoins.

It sounds pretty flimsy but it works, and despite the fact that some exchanges that buy and sell Bitcoins have been robbed, the ledger itself is secure. The problem isn’t Bitcoin, says Bitcoin evangelist Anthony Di lorio.

“It’s with people trusting other third parties to hold onto their Bitcoins. The great thing about Bitcoins is you don’t have to trust anyone but yourself,” he says.

Di lorio is the founder of Decentral, a Bitcoin business accelerator that helps Bitcoin tech startups get up and running. He’s also the executive director of the Bitcoin Alliance of Canada.

You record a Bitcoin transaction in the ledger with a key, a password. If you keep your Bitcoin key where someone else can find it, they can steal it and your Bitcoins. 

That’s where new businesses like those working with Decentral come in—programmers and others creating digital wallets, more secure exchanges, and easier ways to buy and sell things with the cryptocurrency.

Making Money

Bitcoins are created on a regular schedule and awarded to “miners,” people who happened to update the ledger faster than someone else and record a series of transactions. 

But most Bitcoins are just tucked away, hoarded, according to a recent report by Forbes. This has helped drive up the value of Bitcoins, and many people holding Bitcoin treat it like a stock they are expecting to rise. 

The speculation cuts both ways: It gets people interested in owning Bitcoin, but makes it a volatile currency. 

Canada’s largest Bitcoin exchange, Cavirtex, will take that risk on for you if you want to offer Bitcoin payment at your store, however. The Calgary-based exchange guarantees the value of any Bitcoin people give you for 15 minutes—more than enough time for you to transfer your virtual currency back to good old pretend money in the bank.

Cavirtex made national headlines recently by putting six new Bitcoin teller machines (BTMs) on the streets of Toronto. Now you can put those Bitcoins in your digital wallet and exchange them for cash to buy a cheeseburger. 

But beyond speculative hoarders and jumpy values, Bitcoin has a bigger challenge—you can’t spend it many places, and even the places that will accept it don’t see much Bitcoin business. 

If people don’t use it to buy and sell goods, or at least transfer money across the globe, then Bitcoin is money without much currency. Local Toronto businesses that accept Bitcoin told Epoch Times that it hasn’t brought in much business. 

That could be changing, though. The Wall Street Journal reported that eBay is in talks with a Bitcoin processor. And despite the fact that major online retailers like aren’t seeing a large percentage of Bitcoin sales, they are tapping into a new market.

“Every week it seems to be responsible for, on average, 100 new customers. It is kind of a big deal that way,” said Overstock spokesman Judd Bagley.

Online retailers are normally willing to pay in the range of $5-$20 to get a new customer.

Bagley says offering Bitcoin payment brings in about $10,000-$15,000 a day in sales, or around a quarter of one percent of sales.

It’s also cheap for new businesses to add Bitcoin as a payment option. And unlike Visa and Mastercard, Bitcoin doesn’t charge retailers that 3 percent transaction fee that helps fund your Air Miles.

Now it’s just a matter of those hoarders trading in some Bitcoin for laptops and vintage GI Joes.

If there is one major threat to Bitcoin, it’s banks, says Cavirtex VP of business development Kyle Kemper. He worries that if Bitcoin takes off, a powerful banking lobby will push to have it hyper-regulated. 

That could undermine its revolutionary potential to create a currency outside the control of banks and governments. Kember compares Bitcoin’s potential to change Canada to the railroad that bound the country together. 

“This is going to be the railroad of money.”

[This article was edited to include more information about‘s Bitcoin business.]