OTTAWA - The federal government is trying to crack down on virtual currencies such as bitcoin, but details of the new currency were virtually unknown to the finance department officials as early as six months ago.
Finance department documents obtained by QMI Agency through an access to information request indicate that finance officials thought bitcoin "doesn't make sense" and suggested it was "a fad" that took advantage of financially ignorant Canadians.
A large part of the 100-plus documents were significantly redacted but they reveal some of the thinking at the finance department in the weeks leading up the recently tabled legislation that seeks to regulate virtual currencies such as bitcoin.
"Doesn't understand how it's managed," read part of the November 2013 hand-written notes by an unnamed finance department employee about a bitcoin briefing meeting with associate deputy finance minister Jean Boivin.
"It is business model that doesn't make sense - based on fad - exploiting consumer illiteracy," the notes continued. "If (bitcoin) catches on and becomes widespread, then maybe used for (money laundering)."
Bitcoin is a roughly five-year-old, decentralized, virtual currency that can be bought and traded anonymously online. An increasing number of real-world businesses across the country have begun accepting bitcoins as cash.
The currency is also highly volatile. One bitcoin costs about US$460, down from a high of over US$1,200 in 2013.
Jillian Friedman, legal counsel at Montreal's Bitcoin Embassy, told QMI Agency Monday that she wasn't surprised that finance department officials were confused about how bitcoin worked.
"It's easy to forget that to the broader society (bitcoin) still relatively small on people's radars right now," she said.
However, the government has clearly caught on, because the recently tabled 2014 Budget Implementation Bill extends the application of Canada's money laundering and terror financing laws to virtual currencies, such as bitcoin.
Stephanie Rubec, spokeswoman for Finance Canada, told QMI that the legislation is aimed at virtual currency exchanges and not individuals or businesses using the new currency.
She said the government is "actively studying bitcoin and virtual currencies," and that Canada recognizes that currencies like bitcoin offer innovative "new opportunities for non-traditional payments."