
Obstacles and Opportunities: Takeaways from the 2018 FinTech Canada Conference
The FinTech Canada conference, hosted by Toronto’s Digital Finance Institute, represents one of the largest annual gatherings of FinTech enthusiasts, entrepreneurs and partners in Canada. The purpose of the conference is to bring together global thought leaders and innovators in the FinTech space, with aims of driving innovation, furthering discussion, as well as recognizing and highlighting the achievements of peers in the industry.
This year’s conference, which occurred in August at the MaRS Discovery District, featured themes such as the importance of collaboration, the challenges surrounding compliance and regulations, as well as the future of banking and cryptocurrency exchanges. A diverse range of individuals, from CEOs to policymakers, shared their stories and concerns about the latest developments on the MaRS stage.

In a panel titled “The Global Impact of Blockchain and Digital Currencies”, blockchain CEOs, a security advisor, and an educator talked about the current climate, touching on recent market developments such as cryptocurrency ETFs and full anonymity.
One topic brought up was the issue of cryptocurrency anonymity and traceability. Citing well-known purpose-built anonymous blockchains such as Monero, the panelists described various pull factors for large financial institutions to adopt fully anonymous blockchains for client protection and privacy. Although transparent and traceable blockchains promise strong anti-money laundering and enforcement, large account holders such as corporations may not want their transactions publicly available, and assets without a traceable history help to protect innocent owners against potentially dangerous actors from previous transactions.
Future cryptocurrency policymakers may face a dilemma: should they prioritize privacy and efficiency, or security and transparency?
The panelists discussed the roadblocks towards a blockchain ETF, citing official regulations following the 1929 stockmarket crash, and not yet mature infrastructure surrounding security tokens and coins to protect investors, preventing a mass-market adoption. For policymakers, the government adoption of cryptocurrencies as a decentralized asset could undermine fiscal and economic policy control, as well as national sovereignty, making a cryptocurrency-dominated future unlikely while independent nation-states exist.
Old lessons and immature technology may be preventing the mass adoption of cryptocurrencies, while governments fear losing control.

In another panel aptly named, “CEOs of Digital Currency Exchanges Talk Blockchain and Crypto”, a panel of digital exchange executives discussed the directions they see the industry heading.
In the highly lucrative and speculation-fueled business of crypto-to-crypto conversions, volatility and opportunity are abundant, the panel agreed. Banks are hesitant to onboard some of these exchanges due to the risk involved with a speculative and still maturing market, especially in the wake of various high-profile compromises of centralized exchanges such as Mt. Gox. A more secure type of exchange that promises security is the decentralized exchange, or DEX, which removes the vulnerabilities of a centralized entity, replacing it with peer-to-peer connections. While DEXs may be more secure and scalable, they are currently plagued by long processing times and cannot handle high surges in trade volumes.
Decentralized exchanges, or DEXs, may come to replace the inherently vulnerable centralized cryptocurrency exchanges of today, however cannot match the speed of centralized exchanges.
Competition is at an all-time high for cryptocurrency exchanges, and with it, demand for constant innovation and additional value for customers. Some exchanges are considering growing their market share through negative commissions, in return for investors contributing liquidity and generating a market on the platform. Zero-fee exchanges are on the horizon, some panelists predict. They also expect lots of consolidation stemming from competition, both horizontal and vertical, as exchanges seek to establish international presences.
A very competitive market has driven down fees and increased consolidation in cryptocurrency exchanges, with some exchanges poised to offer zero-fee or negative commission pricing.

Another theme that was discussed was the importance of cybersecurity for FinTechs. One may picture a hacker as a lone figure in a hoodie, huddled in a dark room, however the reality is that 80% of cybercrime originates from organized criminal activity, and collaborate extensively to execute high-profile attacks. Some hacking groups are very professional and provide a Cyber-Crime-as-a-Service approach. The FinTech and banking industry is being outpaced by the collaborative and rapidly growing cybercrime underworld. Financial institutions and companies must collaborate in order to keep up.
Many speakers emphasized the value of security partnerships and data-sharing cross-company networks. Pooling large amounts of quality transaction data between companies helps to create more advanced AI and understanding of dynamic threats. Brian Klein, a financial crime lawyer, noted that the public and transparent nature of many blockchains allow law enforcement to easily trace fraudulent transactions. Many government agencies such as FINTRAC, IIRC and FINCEN are adept at analyzing ledgers and investigating wallets. Collaboration with government regulators and standardizing security procedures will help accelerate the adoption of blockchain infrastructure by companies and investors.
When it comes to FinTech cybersecurity, collaboration is key to winning the arms race against increasingly organized and professional hackers.

The 2018 FinTech Canada conference brought together a great roster of speakers and provided some interesting technical and business insights into the rapidly growing Canadian FinTech ecosystem. While competition may be fierce in many sectors such as banking, payments and exchanges, it remains in the collective interest of companies, investors and policymakers to collaborate to develop an ecosystem of protocols, networks and information. This will enhance the legitimacy and reputation of Canada’s strong FinTech potential both at home and abroad.

