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Canadian financial regulators have approved the public sale of a new
digital currency in the country's first official endorsement of money created
independently of the government or central banks, company officials said on
Wednesday. Produced with digital encryption techniques, cryptocurrencies like
Montreal-based impak Coin allow users to create their own money supply - with
potentially significant impacts for how wealth and property rights are
controlled. Impak Coin has already raised more than C$1.5 million ($1.18
million) for the new currency and plans to launch an Initial Coin Offering - or
a public sale of the digital money - this month.
By allowing people to create a new currency, the project aims to reduce
the power of big banks in determining how property rights are managed and money
is created, said Paul Allard, chief executive of impak Finance, the social
enterprise behind the project. It is up to communities to decide how to manage a currency, it is
not only for the government to decide," Allard told the Thomson Reuters
Foundation.
'No need for government'
Throughout modern history governments have had control over how money is
created and the power to enforce contracts and determine how goods and services
are transferred. Cryptocurrencies - through blockchain, the information storage
and database system they use - have challenged that power, said Simon Trimborn,
a professor at the Free University of Berlin who studies digital networks.
"The link between cryptocurrencies and individual property rights
is the information storage and transaction system behind cryptocurrencies, the
blockchain," Trimborn told the Thomson Reuters Foundation. "It is a
database which can guarantee property rights while there is no need for relying
on a company or government." Contracts are made digitally between peers
and transactions are often conducted without government oversight, reducing the
state's power over the market.
The move by financial authorities to approve the sale of the digital
money means "confidence and trust for investors", said Jean-Philippe
Vergne, a professor at the Ivey Business School in Ontario, Canada, who studies
cryptocurrencies.
"We are observing a profound change in the nature of
capitalism," Vergne told the Thomson Reuters Foundation. "For the
first time we have a technology that allows us to remove intermediaries such as
government or central banks."
Digital impact
Impak Finance hopes to raise up to C$10 million from its first sale of
coins. Users who buy the new currency will be able to spend it via a mobile
wallet connected to their phones. More than 500 businesses have signed up to
accept the new currency when it launches, Allard said. He expects that will
grow into the thousands as the project develops a "critical mass" of
users, leading to more buyers and sellers making transactions.
Users will be able to exchange impak coins for traditional money which
will be credited to their accounts after an initial waiting period in order to
stop speculators from causing volatility in the currency's value, Allard said. Impak
Finance will initially keep 40 percent of the money invested in the new
currency as reserves in order to have cash on hand if users want to exchange it
for traditional money.
Only businesses adhering to social and environmental standards are able
to use the currency, said Allard, who hopes consumers interested in ethical
purchasing will be attracted to the plan. The "impact economy" - a small
but growing sector that seeks to put the achievement of social good at the
center of business - is expected to grow by more than 15 percent next year in
North America, Allard said.
New type of property
Impak Finance will be entering a crowded market of new digital
currencies, analysts said. Following the growth of bitcoin, the most well known
cryptocurrency, there are now more than 1,000 similar digital currencies being
traded over the internet, said Arvind Narayanan, a computer science professor
at Princeton University in the United States.
Most of these new digital offerings, however, are used for speculation -
investors hoping the currency will gain popularity and then rise in value -
rather than buying and selling tangible goods and services, Narayanan said. "People
are trying to get the state out of money and various forms of property,"
Narayanan told the Thomson Reuters Foundation. "regulators and law
enforcement are trying to adapt to a new technological development."