Why are Canadians buying Bitcoin?

In cities across the country, the ability to buy Bitcoin is becoming easier.

Just last week, Toronto and Ottawa hadtheir first Bitcoin ATMsinstalled, allowing people to exchange cash for the digital currency. This comes three months after the worlds firstBitcoinATM was installed in Vancouver.

Bitcoin can be traded online for goods and services. Unlike conventional currencies such as dollars or euros, Bitcoin is not tied to any central bank or government.

Demand for the new currency has risen sharply in recent months.

In November, the price of a singleBitcoinwent from around $250 per coin to over $1,000 per coin in a matter of weeks. In mid-December, the price dropped by about half after the Bank of China ordered third-party payment providers to stop using it.

Right now, oneBitcoinis worth roughly $900.

Cuts through regulatory controls

Tony Tang, a finance professor at Wilfrid Laurier University who researches digital currencies, says Bitcoin in and of itself has no value.

But he says it has created some functions that meets certain payment and monetary needs, which has attracted investors who give Bitcoin real financial value through speculation.

Tang says this is whyBitcoinhas been popular with Chinese investors, who view the virtual currency as a valuable commodity such as gold or silver.Its much cheaper and faster to transact withBitcoin, said Tang. So if youre coming from a country with controls on how funds transfer in and out, then it is a very easy way to move your money in and out of the border.

However other buyers like Karina Black, a University of Waterloo student who recently bought $800 ofBitcoin, say they want to have some handy because of its rising popularity.

I would be hesitant about putting a lot of my net worth intoBitcoin, said Black. But I would like to have some in there and it does make shopping online easier.

Seth ORourke, an IT consultant in Kitchener, says hes attracted both for the investment capability as well as long term value.

I see the Canadian dollar relatively as plummeting in value, said ORourke. I think that its a wise decision to switch to a currency thats holding value.

The local Bitcoin broker

Since there are no Bitcoin ATMs in Kitchener-Waterloo, purchases by both Black and ORourke were brokered by Trevor Creech. He and his team at Waterloo start-up Tinkercoin help people buy their first Bitcoin and enter the world of online money.

It turns out its really hard to buy Bitcoin, especially your first time, said Creech. I dont think there was anyone actively selling around here.

Creech and his team introduce Bitcoin novices to the digital currency and handle the technicalities of buying and selling. They charge a six per cent service fee to customers on top of the purchased Bitcoin. Since it is possible to buy fractions of a single Bitcoin, Tinkercoins deals can range from $100 to $1,000 or even higher.

Creech says the people who buy from him range from Bitcoin enthusiasts to established investors who see an opportunity for a high return.

However, since Creech doesnt operate a bank or work out of an office, he meets with most of his clients at coffee shops to finalize deals. He admits the deals can look a bit suspicious.

Essentially two people sit down, exchange a significant wad of cash and they both check their phones and then leave, so its like a drug deal where someone just got royally screwed, said Creech.

He says one of the more bizarre instances was when an established investor paid him $1,000 in $20 bills at a Kitchener shopping mall.

There was no envelope or anything, so I was sitting at this food court table counting out stacks of twenties just hoping mall security doesnt walk by, said Creech.

Like any cash-only deal, Bitcoin does come with certain risks. Creech says a major one is security, since no regulatory oversight means if a persons Bitcoin account is hacked and the funds are stolen, no one will reimburse the loss.

In addition, although Bitcoin is relatively stable now, it does have the capability to crash again.

The future of money?

Although Creech continues to make deals on a daily basis, he says eventually he would like to see banks issue Bitcoin accounts in the same way they do for U.S. dollars.

It's a matter of time before you start to see a few places in town accept it.- Benjamin Robers, Bitcoin enthusiast

The reality is, the banks are somewhat threatened by Bitcoin, said Creech. Just because its very new and big institutions like that dont move very quickly. Its going to be tough to get them on board with something like that, but its something we could see in fouror fiveyears.

However, Canadas finance department told the Wall Street Journal last week the government does not recognizeBitcoinas legal tender.

And in a statement to CBC News, the Bank of Canada said it is actively monitoring virtual currencies, but "financial stability considerations are what would prompt the Bank to take a greater interest in Bitcoin."

Benjamin Roberts, a designer at Waterloo tech startup Thalmic Labs who calls himself a Bitcoin enthusiast, believes in the long runBitcoin could have the same kind of effect on money that email had on communications.

Its absolutely incredible how quickly its catching on, and theres online merchants coming online every day and more brick and mortar merchants coming online, said Roberts.

I really think its a matter of time before you start to see a few places in town start to accept it.