In what’s been a terrible run for cryptocurrencies, the last week was the worst one yet.
FTX, one of the biggest and most trusted cryptocurrency exchanges in the world, suddenly announced it was being bought by its biggest rival for pennies on the dollar — and then that rival refused to even pay those pennies after it became clear the legal and financial mess it would be taking on. Deposits were frozen, withdrawals were halted and FTX founder Sam Bankman-Fried went from being a multibillionaire to bankrupt in a matter of hours.
It’s hard to overstate the damage this will do to whatever remaining credibility the cryptocurrency movement has left. FTX was “once seen as a trustworthy oasis in a sketchy industry,” according to the Globe and Mail’s Tim Kiladze, and its collapse is being compared to events that precipitated the global financial crisis in 2007. As Axios’s Felix Salmon wrote, “FTX, along with its sister company Alameda Research, was ultimately brought down by the exact same thing that killed Lehman Brothers — excess leverage.”
This is obviously bad news for anyone who owns a cryptocurrency like Bitcoin, which dropped by nearly 20 per cent this week. But it’s also a problem for Canada’s crypto-curious conservative politicians, who were talking up its potential just a few months ago. Pierre Poilievre, of course, infamously suggested back in March that Canadians could use it to “opt out of inflation,” although it turns out they would have been opting into a financial catastrophe if they’d followed his advice.
But he was hardly the only conservative politician pumping crypto’s digital tires.
During an April edition of the Danielle Smith Show, hosted by the Western Standard, the future premier of Alberta suggested: “The best way to fight Ottawa is going to be embracing this emerging industry, and in particular the mining of Bitcoin. It will make us the richest jurisdiction on the planet.” Smith built on that in her May newsletter, which was published just before she announced her bid to replace Jason Kenney as the leader of the United Conservative Party, where she talked up crypto’s potential in predictably conspiratorial terms.
“If Canada is moving toward a central bank digital currency, and the WEF is championing central bank digital currencies, and if governments can use it to develop social scores (like China) to punish and reward its citizens, how can you escape the system? How can you get the equivalent of cash that can’t be centrally controlled, monitored, devalued or turned off?” she wrote. “Now you understand why so many of us are interested in Bitcoin and cryptocurrency.”
She was hardly alone there. The Government of Alberta actually made a concerted push to attract cryptocurrency investment to the province, with then-Jobs and Economy Minister Doug Schweitzer suggesting “there’s an opportunity for Alberta to play a leadership role in Canada by creating a home for these venture companies.”
In June, Bankman-Fried’s FTX announced it had acquired Bitvo, a Calgary-based exchange that was regulated in all provinces and territories, and that its Canadian expansion would be centred in Alberta. “FTX launching in Calgary will help further grow our reputation and our opportunities in technology and innovation, specifically in blockchain technology,” Schweitzer said.
Well, so much for that. FTX’s deal with Bitvo was expected to close in the third quarter, but the Calgary company’s CEO declined to comment on what the state of play is now — or whether it will be part of FTX’s collateral damage. It’s safe to assume many individual Albertans, and Canadians, are part of that as well.
Opinion: Conservatives' inability to see cryptocurrency flaws speaks to their judgment, ability to detect bullshit, willingness to traffic in unproven ideas. @maxfawcett writes for @NatObserver #cdnpoli #cryptocrash #cryptocurrency
According to recent data from cryptocurrency education platform CryptoManiaks, “Canada ranks as the fourth most crypto-obsessed country, with 1.7 million monthly searches.” Many of those searches were surely inspired by the way in which conservative politicians like Poilievre and Smith talked about cryptocurrency, and their effort to frame it as some sort of bulwark against progressive politics and policies.
If there’s a saving grace here it’s that government officials in the United States were able to resist the anti-regulatory pressure being applied by crypto entrepreneurs like Bankman-Fried. As Dennis Kelleher, the CEO of a D.C. lobby group called Better Markets, told the Globe and Mail’s Kiladze, “The untold story so far is the regulators kept it out of the banking system.” That means the crypto crash hasn’t spilled into the broader market or damaged the portfolios and retirements of Canadians who didn’t buy what people like Poilievre and Smith were selling.
That doesn’t excuse their attempt to sell it to them, though.
Canada’s crypto-curious conservatives have gotten conspicuously quiet, but their retreat into the metaphorical bushes can’t hide the enthusiasm they were showing just a few months ago. That they either couldn’t or wouldn’t see cryptocurrency’s flaws speaks to their judgment, their ability to detect bullshit and their willingness to traffic in unproven ideas.
In the end, those things will almost certainly cost Canadians more than whatever they might have already lost by following their advice on crypto.