On December 11, Vancouver city councilors voted in favor of Mayor Ken Sim’s motion to make the city “Bitcoin-friendly” and authorize staff to look into holding cryptocurrency in reserve.
Mayor Ken Sim, who has been serving as mayor of Vancouver since 2022, said to CBC that he thinks investing in Bitcoin (BTC) is financially responsible in an era of inflation and market volatility and even agreed to donate $10,000 worth of BTC to the city from his personal holdings. City officials will now work to see if BTC can be incorporated into the city’s financial strategies and whether it can invest in cryptocurrency by converting a portion of Vancouver’s current financial reserve.
The motion stated that the City of Vancouver would be “irresponsible” if it did not evaluate the “merits” of incorporating BTC into its strategic assets in order to preserve the city’s financial stability. Capped at a supply of just 21 million coins, BTC has frequently been described as a digital version of gold, one that may serve as a store of value that shelters from inflationary pressures.
The mayor says he sought advice from the city’s auditor general before formulating his motion. Leading the way were several speakers, including experts such as Victoria Lemieux, head of the Blockchain research cluster at the University of British Columbia, for whom support for the council’s decision was a no-brainer. However, there have been concerns over the environmental footprint of BTC mining, as well as the volatility of cryptocurrency, making it a questionable option for city financial reserves. Lemieux also said, “Mining BTC would take a lot of energy” to CBC.
Can Bitcoin be used as a reserve asset in Vancouver?
The Bank of Canada’s Currency Act prevents cities from being able to send BTC as payment for local expenditures or even hold it as a reserve because they are confined to investments which do not come with financial risk. It goes on to explain that the only legal currency is physical money such as notes and coins, made and issued by the Bank of Canada or the Royal Canadian Mint. Crypto is considered a commodity and not money under Canadian law, according to the Canada Revenue Agency.
However, Section 27.1 of the Bank of Canada Act permits the Bank to create a special reserve fund to absorb unrealized valuation losses resulting from movements in the fair value of the Bank’s investment portfolio. Although this provision does not directly address cryptocurrencies, it creates leeway regarding the assets the Bank of Canada could evaluate. While legislative changes would be required, Vancouver’s motion signals a potential shift toward integrating BTC into official financial portfolios. The motion, therefore, could indicate a readiness for Vancouver to contest the current status quo.
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