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Will Canadians’ cryptocurrency love affair continue post-FTX crash?

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This Christmas, giving the gift of cryptocurrency may not make your family as happy compared to years past. Prior to the crash of the cryptocurrency exchange FTX in November, Canada was one of the most crypto-obsessed countries on Earth. 

A study conducted at the time by CryptoManiaks found that Canadians searched about crypto-related topics more than nearly every other population on Earth, behind only the Germans, Turks, and the Dutch.

According to the study, there were 1,671,800 searches per month, a number equivalent to 4.3 percent of the Canadian population. 

The FTX crash resulted in massive losses for investors as cryptocurrency values plummeted, resulting in roughly $8 billion in losses for depositors. Commentators have speculated that the crash might be the end of the cryptocurrency industry. 

Will the crash of FTX and the arrest of founder Sam Bankman-Fried be the end of that Canadian obsession? 

Matt Spoke is the founder of the fintech company Move and Hub contributor who has worked in the cryptocurrency industry. He says any loss of enthusiasm from the FTX crash will be temporary, even if he cannot predict how long it will take to recover. 

“Obviously in the short term, it’s caused a lot of volatility, a lot of loss of trust. But when one looks at entering the system, there are probably 1000 other bad actors out there that are eventually going to get flushed out every time one of these big headline-grabbing hacks or frauds or thefts or whatever occurs,” says Matt Spoke. 

Bankman-Fried faces a plethora of charges in the United States related to FTX, including conspiracy to commit wire fraud, wire fraud, and conspiracy to defraud the Federal Election Commission. 

Spoke says that fewer bad actors is a positive development in any industry and that Bankman-Fried’s creation was ironic considering what crypto was intended to become. 

“Bitcoin and crypto more broadly promised this decentralized financial world, and FTX was sort of the antithesis to that,” says Spoke. “FTX was this massive honeypot centralized organization where you are effectively depositing money denominated in Bitcoin or Ether or other crypto assets into a bank that has all of the risks associated with being a bank, but without any of the regulatory oversight.” 

Nigel Barber, an evolutionary psychologist who has written about cryptocurrencies, says there is no good way to determine the actual value of cryptocurrency, which is risky for investors. 

Barber compares cryptocurrencies to the Dutch tulip craze in the 17th century when people spent vast fortunes on quantities of the flowers, despite it lacking any precise value, eventually resulting in the tulip bubble popping and a tremendous wealth wipeout. 

“The biggest problem with investing in crypto, or tulips, is that there is not a reliable way of determining valuation,” says Barber. “This means that enthusiasts see the value going skywards whereas skeptics set the value at zero. One consequence of price uncertainty is wild price swings that create speculation.” 

Barber says the FTX crash is a real issue for cryptocurrencies because it revealed the shortcomings that result from the same issues of any unregulated currency, such as fraud and deception. He says this can be observed in the FTX scandal, as well as the theft of crypto by criminal entities. 

“Crypto is not a reliable store of value and is not secure. These basic confidence issues are not going away,” says Barber. “They cannot be solved by government regulation since effectively there is none.” 

Spoke says FTX represented the worst of both worlds, combining the volatility of crypto and the risk of traditional banks but no regulatory oversight. 

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Nonetheless, Spoke believes cryptocurrencies are not going to disappear.

“I don’t think that FTX really shakes my confidence that there’s value being created in this industry,” says Spoke. “To me, it means that you can’t build services for crypto the way you would have built services for banking or traditional financial products. And when you try to blend these two worlds, it creates these pretty significant blow ups.” 

Spoke says wealthier countries like Canada will have more people exposed to alternative investments like cryptocurrencies, and those people will be far more interested. 

“There’s a lot of hoops you have to jump through to understand crypto to begin with, and it’s not something that’s all that approachable to people that don’t have a certain level of basic financial sophistication,” says Spoke.

While Canada and Germany are among the countries with the most online searches for cryptocurrency, the countries with the highest levels of actual cryptocurrency investment fall outside the world’s most advanced economies in the G7. 

According to CEOWorld Magazine, the United States is just the 14th most invested country in cryptocurrency per capita, with developing economies like Nigeria, Thailand, the Philippines, South Africa, and Brazil falling within the top ten. 

Two decades of donation data show Canadians are more Scrooge-like than ever

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Twenty years worth of tax data shows that Canadians are becoming increasingly Scrooge-like when it comes to charitable giving.

In 2000, 26 percent of Canadians donated to charity, while only 19 percent opened their wallets in 2020, the most recent year with available data.

The amount of money being donated each year is also falling, with Canadians donating about 0.72 percent of their income in 2006, compared to 0.49 percent in 2020.

The numbers, compiled by the Fraser Institute, show that Manitoba is the most generous province and Quebec is the least generous, based on the percentage of income donated to charity in 2020.

The percentage of donors has been low for nearly two decades, even while Canadians continue to tell pollsters that charities are as important as ever, said Andreae Sennyah, the director of policy at Cardus.

“I think if you spoke to the average person, you’d be hard-pressed to find somebody who doesn’t support the work of charities writ large, in terms of what they say,” said Sennyah.

“I wonder if we have lost the sense of responsibility to support the charities that we say that we care so much about? I think the gap is there. It’s the sense of actual responsibility for our own communities and the role that charities play within them,” she said

At the same time as donations are plunging, Canadians are also increasingly worried that they will have to access charities in the near future.

According to Cardus, about 26 percent of Canadians anticipate that they will access, or are already accessing, the services of a charity this year. About the same number of Canadians say they will likely be donating less this year due to the state of the economy.

Sennyah recommends that Ontario boost its charitable tax credit, which is currently the lowest among Canadian provinces with a 5.05 percent tax credit for the first $200 in donations and an 11.16 percent tax credit for amounts over $200.

By nearly doubling both tax credits and raising awareness among Ontarians about the new benefit, Sennyah believes it has the potential to juice donations in the province at a time when charities are facing the dual challenge of declining donors and an increase in people requesting their services.

And if Ontario is looking for inspiration, or a case study on the impact of boosting these tax credits, it will soon have one. Although Alberta has one of the most generous charitable tax credits in Canada, it will soon be getting bigger.

United Conservative Party MLA Dan Williams saw his private member’s bill to boost his province’s charitable tax credit pass third reading last week.

Williams said he didn’t want to just “tinker” with the tax credit and instead proposed to increase it to 60 percent from 10 percent, in the hopes of significantly boosting charitable giving in Alberta.

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Based on data on donations in previous years, Williams expects that the increased tax credit will amount to about $50 million in foregone revenue for the provincial treasury. That number could be even higher if, as Williams expects, the legislation leads to an increase in charitable giving in the province.

Those revenue projections meant that Williams had to have some “long conversations” with Finance Minister Travis Toews about the implications of his bill. Toews, and both sides of the legislature, have been supportive, said Williams, as evidenced by how quickly the legislation was unanimously passed this month.

It’s not a coincidence that the new tax credit, when combined with the federal tax credit, matches the amount that Canadians receive when they make a donation to a political party.

“We as politicians have set our tax refundable receipt for the first $200 in Alberta at 75 percent. That’s exactly what it will be (for all charities) now that we have passed this bill, between the federal and provincial credit combined. And we’re clever, if not self-interested, as politicians, and we know it’s a great way to get people on board early on and get them into that habit of giving,” said Williams.

“But are charities not as important or more important?” he said.

If charitable giving continues to fall, but the services charities provide are still in demand, Sennyah said it’s likely the government will fill the gap, which would take something intangible out of society.

“There’s an unquantifiable element to what charities are able to do. You compare a cheque you get in the mail, compared to someone serving me soup at a soup kitchen. What you and I do at a soup kitchen is completely beyond the scope of what a government can do and what I arguably would say what they should do,” she said.