Key Points
- Vancouver city councilors vote to explore the possibility of making the city “Bitcoin-friendly” and holding cryptocurrency in reserve.
- Mayor Ken Sim believes investing in Bitcoin is a financially responsible move amidst inflation and market volatility.
Mayor Ken Sim of Vancouver, who has been in office since 2022, expressed to CBC that he considers investment in Bitcoin (BTC) to be a financially savvy move in this era of inflation and market instability. He even committed to donating $10,000 worth of BTC from his personal assets to the city. The city’s officials are now tasked with determining whether BTC can be integrated into Vancouver’s financial strategies and if a portion of the city’s current financial reserve can be converted into cryptocurrency.
The motion suggested that it would be “irresponsible” for the City of Vancouver not to consider the “merits” of integrating BTC into its strategic assets to maintain the city’s financial stability. Given that the supply of BTC is limited to just 21 million coins, it is often likened to a digital version of gold. It could potentially serve as a value store that offers protection from inflationary pressures.
Consulting Experts and Evaluating Environmental Impact
Before putting forth his motion, Mayor Sim consulted with the city’s auditor general. Several experts, including Victoria Lemieux, head of the Blockchain research cluster at the University of British Columbia, were supportive of the council’s decision. Yet, concerns have been raised about the environmental impact of BTC mining and the volatility of cryptocurrency, which could make it a risky option for city financial reserves. Lemieux mentioned to CBC that “Mining BTC would take a lot of energy”.
Potential Legal Obstacles
The Bank of Canada’s Currency Act currently prohibits cities from using BTC for local expenditures or holding it as a reserve. The Act confines cities to investments that do not carry financial risk. It specifies that the only lawful currency is physical money such as notes and coins, issued by the Bank of Canada or the Royal Canadian Mint. According to the Canada Revenue Agency, crypto is viewed as a commodity and not money under Canadian law.
However, Section 27.1 of the Bank of Canada Act allows the Bank to establish a special reserve fund to offset unrealized valuation losses from fluctuations in the fair value of the Bank’s investment portfolio. While this provision does not directly address cryptocurrencies, it provides some flexibility regarding the assets the Bank of Canada could evaluate. Legislative changes would be necessary, but Vancouver’s motion suggests a potential shift toward incorporating BTC into official financial portfolios. This motion could indicate Vancouver’s readiness to challenge the current status quo.
