The security and financial implications of blockchain technologies: Regulating emerging technologies in Canada
| DOI | 10.1177/0020702017741909 |
| Published date | 01 December 2017 |
| Date | 01 December 2017 |
| Subject Matter | Scholarly Essays |
Scholarly Essay
The security and
financial implications of
blockchain technologies:
Regulating emerging
technologies in Canada
Evangeline Ducas
School of Public Policy and Administration, Carleton University,
Ottawa, Ontario, Canada
Alex Wilner
Norman Paterson School of International Affairs, Carleton
University, Ottawa, Ontario, Canada
Abstract
Driven by advances in data analytics, machine learning, and smart devices, financial
technology is changing the way Canadians interact with the financial sector. The evolving
landscape is further influenced by cryptocurrencies: non-fiat, decentralized digital
payment systems, like Bitcoin, that operate outside the formal financial sector. While
Bitcoin has garnered attention for facilitating criminal activity, including money launder-
ing, terrorism financing, digital ransomware, weapons trafficking, and tax evasion, it is
Bitcoin’s underlying protocol, the blockchain, that represents an innovation capable of
transforming financial services and challenging existing security, financial, and public
safety regulations and policies. Canada’s challenge is to find the right balance between
oversight and innovation. Our paper examines these competing interests: we provide an
overview of blockchain technologies, illustrate their potential in Canada and abroad, and
examine the government’s role in fostering innovation while concurrently bolstering
regulations, maintaining public safety, and securing the integrity of financial systems.
Keywords
Blockchain, disruptive technology, money laundering, terrorism financing, financial
regulation, cryptocurrency, Bitcoin
International Journal
2017, Vol. 72(4) 538–562
!The Author(s) 2017
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DOI: 10.1177/0020702017741909
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Corresponding author:
Alex Wilner, Norman Paterson School of International Affairs (NPSIA), Carleton University, Richcraft Hall,
1125 Colonel By Drive, Ottawa, Ontario, K1S 5B6, Canada.
Email: alex.wilner@carleton.ca
Introduction
Recent technological advancements in financial service delivery in Canada and
abroad have elicited strong reactions and excitement from industry, government,
and consumers alike. Canadians can now transact directly and cheaply through
mobile phone applications, seek investment advice from near-autonomous online
robo-advisors, and access seed funding for new business ventures from a variety of
equity crowdfunding platforms. Advances in other industries, including data ana-
lytics, machine learning, and smart devices, have spurred further developments in
these areas. While the link between finance and technology is nothing new, a
surging interest in the use of technology to deliver financial solutions has resulted
in a collective reimagining of the phenomenon, perhaps best captured by the
increasingly popular portmanteau ‘‘fintech.’’ Many of the recent advancements
in fintech appear to constitute a class of their own. As Douglas Arner and col-
leagues aptly illustrate, we have entered a new period of technological change
across the global financial sector, driven as much by the unprecedented speed of
innovation as by who is driving it.
1
The emerging fintech era is characterized by the
entrance of both agile start-ups and established tech giants, such as Apple and
Facebook, which are competing with traditional financial institutions. In addition
to providing new and at times innovative products and services, these changes in
the financial sector landscape have pushed financial actors to revisit antiquated
infrastructure, business practices, and priorities, spurring further innovation.
2
Academic attention from various disciplines has been placed on better charting
the novelty of these developments.
3
Other work has gone towards understanding
how emerging technology can best be approached from a regulatory perspective.
Central to this discourse is Philip Cerny’s examination of how technological
advancements have historically influenced financial regulation: technology drives
financial globalization, impeding state control over these developments by increas-
ing inter-jurisdictional decentralization.
4
Other scholars, like Giselle Datz, have
suggested instead that technological innovation (coupled with global economic
integration) have forced some aspects of the traditional state, including centralized
debt and asset management agencies, to evolve into private sector-like actors.
5
Either way, rapid advancements in fintech evoke fresh concerns that contemporary
technological developments are ushering in a new cycle of disruptive innovation,
of economic boom and bust.
6
1. Douglas Arner, Janos Barberis, and Ross Buckley, ‘‘The evolution of fintech,’’ Georgetown Journal
of International Law 47 (2016): 1271–1319.
2. Daniela Gabor and Sally Brooks, ‘‘The digital revolution in financial inclusion,’’ New Political
Economy 22, no. 4 (2017): 423–426, at 429–432.
3. Taylor Nelms, ‘‘Alt.economy: Ethnographic explorations of alternative economic imaginaries,’’
Journal of Cultural Economy 9, no. 5 (2016): 508–512.
4. Philip Cerny, ‘‘The dynamics of financial globalization,’’ Policy Sciences 27 (1994): 319–342.
5. Giselle Datz, ‘‘Governments as market players,’’ Journal of International Affairs 62, no. 1 (2008):
35–49, at 45–46.
6. Carlotta Perez, Technological Revolutions and Financial Capital (London: Elgar, 2002); D. Foray
and C. Freeman, eds., Technology and the Wealth of Nations: The Dynamics of Constructed
Ducas and Wilner 539
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