The Interview

Facebook’s only Canadian Libra partner talks global regulation concerns, plans to shape the cryptocurrency

Sonia Sennik, executive director of the Creative Destruction Lab, an incubator headquartered at the University of Toronto’s Rotman School of Management. Creative Destruction Lab
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The only Canadian organization Facebook has signed up for its Libra digital currency expects domestic policymakers to follow the lead of the U.S. and the U.K. in regulating the token. 

“We don’t see any reason why Canada would be meaningfully different than the much bigger markets,” said Sonia Sennik, executive director of the Creative Destruction Lab (CDL), a Toronto-headquartered startup incubator.

Facebook claims its users and those of its subsidiaries Instagram and WhatsApp will be able to use Libra to transfer money more cheaply, particularly internationally. The tech giant also plans to offer financial services like loans based on the token.

In her first interview since Facebook announced the coin—and the Libra Association, a Geneva-based non-profit to govern it, of which CDL is a partner—on June 18, Sennik discussed why startups in her incubator might choose to use the token’s technology, what kind of regulation she’s expecting it to face and how her organization will be involved in Libra’s development.

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Talking Point

Sonia Sennik, executive director of the Creative Destruction Lab (CDL), expects Canadian regulators to set similar rules to those in larger economies for digital currencies like Facebook’s Libra. In her first interview since CDL joined the Libra Association, Sennik also discussed what role the incubator will play in the token’s development and why the incubator’s startups may want to build products and applications for the technology.

CDL is one of 28 organizations that have signed on to the Libra Association. It’s the only academic partner. Others include payment technology firms PayPal, Stripe, Visa and Mastercard, as well as tech companies Uber, Lyft, Spotify and eBay. 

Sennik said the startups in CDL’s blockchain stream won’t be required to adopt Libra, but could choose to build products and applications on it because of the opportunities it will create. “The intention is to create a global platform—that’s what the association is doing,” she said. “Our companies are … ambitious, and they’re looking to build their products and applications that can reach the largest markets in the world.”

While corporate members of the Libra Association are contributing US$10 million each to the project, Sennik said “social impact partners” like CDL don’t have to pay. 

“The Libra Association is keen to have a certain amount of social impact partners included, so that this association’s comprised of a diverse set of voices,” she said. “It’s all about inclusion, and it’s all about making sure that there’s good representation of all the different types of organizations.”

Sennik said CDL is particularly interested in Libra’s programming language, Move: “We think that thoughtfully designed smart contracts operating on a widely accessible, scalable global currency platform will unlock never-before-seen gains from trade.”

Smart contracts automatically process transactions when certain conditions are met, for example, releasing a payment to a vendor when a shipment arrives at its destination. Law firms and logistics companies have begun to roll them out, but they have not been widely adopted. 

While startups may see an opportunity, policymakers in some of the world’s largest economies have expressed concerns about Facebook’s ambitions to build a widely used coin.  

Sennik expects Canadian policymakers will set rules similar to those in larger economies like the U.S. and the U.K. 

“Companies in the program, they’ll be building products that comply in these bigger markets, so there’s no reason for us to believe there’ll be Canada-specific regulations,” she said.

The federal finance department did not directly answer a question from The Logic about whether it planned to impose regulations on Libra that are substantially different than those in other markets. Greg Sommerville, a communications strategist, said the department is considering whether to impose policies or rules on such tokens. “Given the integrated nature of global financial markets and the cross-border nature of the Libra network and virtual currency, a coherent and interoperable approach across international jurisdictions will be important,” he added. 

In July, The Logic reported that the department and the Bank of Canada would be contributing to a French-led study of tokens like Libra. 

Sennik said the CDL has not been contacted by regulators about its involvement with the Libra Association. 

Policymakers in some major economies have expressed concerns about Libra’s impact on the financial system and ensuring adequate protections for users. “We’ve seen the very beginning reactions from the large markets, and we anticipate many regulatory challenges, such as those already alluded to by the governor of the Bank of England, Mark Carney, and the U.S. Senate Banking Committee,” said Sennik. 

Carney has raised concerns about money laundering, terrorist financing and consumer protection, while Federal Reserve chairman Jerome Powell told the banking committee he’s worried about the coin’s effect on financial stability and user privacy.

On Thursday, President Donald Trump tweeted that unregulated crypto assets can “facilitate unlawful behaviour,” and that Libra “will have little standing or dependability.” He also called on Facebook to register as a bank over its issuing of the token. 

Sennik expects global policymakers to impose a similar level of regulation on Libra as they have for other innovations in regulated sectors, such as driverless cars in transportation or artificial intelligence for medical diagnosis in healthcare. She cited as an example eMurmur, an AI-based heart-screening tool, which passed the U.S. Food and Drug Administration’s medical device approval process in April.

CDL’s contribution to the Libra Association will be its expertise, developed over the seven cohorts of startups it’s incubated since 2012, according to Sennik. “We have connections into academia and researchers and entrepreneurs and inventors, so we understand that viewpoint, and we would bring that into our participation in the association,” she said. CDL claimed it hasn’t determined whether it will produce dedicated research to support its involvement with the group. 

Fourteen companies have already graduated from the blockchain stream since it launched in 2018, including Delphia, which generates trends for investors from users’ de-identified data; Lake Finance, an AI-based cryptocurrency-investing tool; and Inkrypt, a censorship-proof content-hosting platform.

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The incubator started at the University of Toronto’s Rotman School of Management, and now also runs cohorts at the University of British Columbia’s Sauder School of Business, the University of Calgary’s Haskayne School of Business, HEC Montréal, Dalhousie University’s Rowe School of Business and the University of Oxford’s Saïd Business School. Sennik said decisions about whether the five Canadian institutions that CDL works with will be involved in the Libra Association partnership are “still pending.”  

The non-profit has received funding from the federal government and Canadian financial institutions. In November 2018, Innovation Minister Navdeep Bains announced that CDL will receive $25 million from Ottawa’s flagship Strategic Innovation Fund for projects like incubating over 1,300 companies. RBC, BMO and TD Bank have also given the organization a combined $6.5 million. No banks have joined the Libra Association.