A recent report by accounting agency KPMG reveals that cryptocurrencies and blockchain technology are leading investments in Canada's financial technology (fintech) sector. Despite notable declines in transaction volume and value throughout 2023, cryptocurrencies continue to dominate the fintech landscape in Canada. According to KPMG data, the blockchain and cryptocurrency sector witnessed 31 transactions in 2023, surpassing all other verticals within fintech. Following closely behind were the software-as-a-service industry with 24 deals and the artificial intelligence and machine learning sector with 15 deals.
In the report, KPMG partner Edith Hitt emphasized that investor interest in cryptocurrency-related fintech projects is partially fueled by expectations surrounding the potential approval of a spot Bitcoin exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC). Hitt noted that such approval could lead to increased investment in Canadian fintech and spur advancements in the digital asset space. She highlighted the significance of the U.S. ETF approval as a potential catalyst for technological innovation in Canada's fintech industry.
Hitt further emphasized that blockchain infrastructure companies are poised to receive substantial investments in Canada in 2023, signaling a growing interest in blockchain technology within the region. She suggested that investors are forward-thinking and anticipate the potential deployment of central bank digital currencies (CBDCs) in Canada. According to Hitt, blockchain technology could serve as the necessary infrastructure to power a CBDC system, potentially driving further growth in Canada's fintech ecosystem.
However, despite the optimistic outlook for CBDC adoption, skepticism remains prevalent. A Bank of Canada discussion paper published in August 2023 highlighted potential challenges in the domestic adoption of CBDCs. The paper noted that consumers may have "weak incentives" to use CBDCs due to their unrestricted access to traditional financial services. Subsequent surveys conducted by the central bank confirmed these assumptions, revealing that individuals who are aware of CBDCs are generally less inclined to use them compared to those unfamiliar with the technology.
