Minimizing The Risk From Volatility In Crypto Markets

A vibrant blockchain industry calls Canada home. Finance-focused blockchain firms set up shop in Toronto; cybersecurity and government IT firms proliferate in Ottawa, the capital city; and Alberta, the center of Canada’s petroleum industry, houses many supply-chain startups.

Q4 2019 hedge fund letters, conferences and more

Many Canadian businesses have examined blockchain and how they might integrate the technology. According to a 2019 Deloitte survey, 53% of responding firms see blockchain as a top-five strategic priority––a ten percent increase over 2018.

Implementing Distributed Ledger Technology

Moreover, 96% of Canadian companies with 500 employees or less have considered implementing distributed ledger technology. That’s good news for the country’s workers, as employees in the Canadian blockchain space earn $98,000 USD––double the average Canadian yearly wage.

The blockchain and cryptocurrency industry has thrived in Canada in part due to  the country’s low energy cost, high internet speeds, and favourable regulations. While recent regulatory uncertainty has put a damper on the industry, there is still a lot of innovation unfolding––even among public institutions.

The Bank of Canada, the country’s central bank, began exploring blockchain technology in 2017. The central bank partnered with Payments Canada, central payments processor, and R3, a distributed database technology company on research called Project Jasper.

The research found potential cost savings in the clearing and settlement of high-value interbank payments, noting  “DLT-based system allows banks to validate their transactions at the very beginning. It could reduce back-office reconciliation work and potentially achieve major cost savings for the financial sector.”

The Royal Canadian Mint announced a digital currency called MintChip in 2012, which was intended to facilitate the real-time exchange of value between consumers and merchants at reduced transfer costs.

Interest in integrative blockchain strategy extends to the highest echelons of the Canadian private sector. For instance, Walmart Canada introduced an automated blockchain-based network for freight tracking and payments management in November 2019.

How Canada’s Blockchain Industry Can Fully Bloom

For Canada’s blossoming blockchain industry to fully bloom, the country’s industry needs financial tools to help minimize the risk from volatility in crypto markets. Popular USD pegged stablecoins like MakerDAO and Tether pose fiscal impracticalities for Canadians, since they are denominated in  foreign currency, USD. Canada needs its own Canadian Dollar stablecoin.

Prior to the minting of QCAD, crypto holders had to adjust for exposure to FX fluctuations when using the more popular USD-based stablecoins, which could erode returns beyond the point of viability. This risk is present for any non-CAD based stablecoin. In order to avoid volatility from FX to crypto pairing or FX to another fiat currency (USD, EUR or GBP), Canadians need a stablecoin rooted in CAD. Not everyone wants exposure to the U.S. Dollar. Think about it this way: Would U.S. citizens or corporations want to hold only a Euro stablecoin?

Canada Stablecorp’s QCAD could contribute to the broader stabilization of North American financial markets by enabling settlement into the native stablecoin, thereby mitigating exposure to volatility in thinner overnight trade markets. As Canada Stablecorp CEO Jean Desgagne told CoinDesk:

“It allows you to trade, to take positions against other stablecoins in other currencies, USDC in the U.S. for example. It provides a medium of exchange and value.”

Eliminating Exposure To Volatility In Crypto Markets

Canadian institutions — crypto hedge funds, for example — will benefit from the option to liquidate into QCAD overnight to eliminate exposure to volatility in crypto markets, which trade 24/7. Legacy traders don’t yet possess a well-worn roadmap for how to best navigate extended operating hours. When you liquidate into a stablecoin overnight, you remain established in crypto, minimizing exposure without having to exit from the digital asset arena.

Extending Canada’s blockchain leadership, the country is early to the stablecoin game. Besides the U.S., who else has a formidable stablecoin? Canada has a history as an early-adopter in emerging industries and nascent asset classes.

Our major capital markets have been quick to embrace junior entities (by providing a trade ecosystem for junior natural resource companies), as well as oil and gas mining. We’re certainly one of the first movers to legalize cannabis and to allow the trading of cannabis companies and cannabis capital markets. Cryptocurrency is an extension of that mindset.

Canada is innovative and not afraid to lead. And now the country is leading the way in adapting legacy financial market infrastructure for use into the digital world.


About Bitvo

Bitvo is a state of the art cryptocurrency exchange that facilitates buying, selling and trading cryptocurrencies through its website and mobile applications. Bitvo differentiates itself by making transacting in cryptocurrencies easier than anyone else and offering proprietary features such as the Bitvo Same Day Guarantee, the Bitvo Cash Card and technical analysis tools.

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