Canada’s Wealthsimple aims for real-world cryptocurrency use as it looks beyond trading

TORONTO, Jan. 31 (Reuters) – Canadian online broker Wealthsimple wants to chart a future that enables the actual use of cryptocurrencies rather than just facilitating trading, but it will likely encounter unexpected costs and uncertain regulatory terrain along the way.

Wealthsimple was launched in 2014 as a stock trading platform and currently has C$15 billion (US$11.9 billion) in assets. It added cryptocurrency trading in August 2020 with Bitcoin and Ethereum, and has since added more coins, hosted wallets, and internal transfer capabilities, and has said it intends to enable withdrawals.

Wealthsimple’s first feature in the crypto space helped it break into a narrow segment of the Canadian financial industry not dominated by the “Big Six” banks.

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“We understand that part of the appeal of this asset class (is) using an asset, not just investing in it or speculating on it, so we’re going to support that,” Blair Wylie, Wealthsimple’s chief legal officer, said in an interview. . “We are looking to … how we can become smarter, and more connected to public blockchains as a key strategic priority.”

He declined to provide a timeframe for achieving this, or the investment required to expand crypto capabilities in Wealthsimple, which is 43% owned by Power Corp of Canada (POW.TO).

Uses of cryptocurrencies as alternatives to fiat currencies include; To transfer money without intermediaries or transfer fees; and the use of self-executing smart contracts when stipulated conditions are met.

Companies from Tesla Inc (TSLA.O) to PayPal Holdings (PYPL.O) have begun to accept them, but speculation and trading are still by far the most common use.

Ann Connelly, a lecturer at Boston University who focuses on cryptocurrencies and blockchain, said Wealthsimple will have an advantage when it eventually offers real-world use because “they already have a dominant market of people interested in trading.”

Canada had four other crypto companies registered with securities regulators as of January 11, all focused solely on digital assets, unlike Wealthsimple, which is familiar to users who trade other assets. Canada focused primarily on regulating cryptocurrencies as securities.

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Catherine Ten, associate professor of finance at McGill University, said that the recent downtrend in cryptocurrency highlights the benefits of reducing dependence on trading, adding that Wealthsimple’s knowledge and ease of use is a big draw for new crypto users on other sites.

But this can challenge adding more complex capabilities.

For example, “if a company still holds (users) private keys for them or prevents them from sending their cryptocurrency anywhere else, they are selling the crypto vision without offering the real benefits,” Connelly said.

Andreas Park, Professor of Finance and co-founder of the University of Toronto’s blockchain research lab LedgerHub, said Wealthsimple’s plan to enable cryptocurrency withdrawals brings it closer to its goal.

But as regulations evolve, Wealthsimple will have to “continue to dedicate significant resources to building its crypto presence and dealing with regulatory compliance,” said Matthew Burgoyne, crypto and blockchain partner at McLeod Law.

While institutions including the Commonwealth Bank of Australia (CBA.AX) and Spain’s BBVA (BBVA.MC), as well as trading platforms including US-based Robinhood Markets Inc (HOOD.O), have embraced cryptocurrencies, Canadian banks have mostly banned Use credit cards to buy cryptocurrency and avoid dealing with related companies.

While this limits the use of cryptocurrencies, it allows Wealthsimple to gain a foothold. The number of customers registered with Wealthsimple’s Trade product, which includes cryptocurrency, tripled in 2021, according to company data.

“The focus should be on what crypto/blockchain can do, not whether these tokens are good investments,” Park said. This is a much better forward-looking strategy.

(1 dollar = 1.2627 Canadian dollars)

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(Reporting by Nicola Saminather) Additional reporting by Tom Wilson in London. Editing by Denny Thomas and Nick Szyminski

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