Cryptocurrency Could Become a Major Player in Canada Pension Plan

“It’s worth paying serious attention to it.”

Blockchain and cryptocurrency is an exploding market—but that’s part of the reason why it’s hard to trust.

Mark Machin, the head of Canada Pension Plan Investment Board (CPPIB), explained how the Bitcoin and blockchain space is not quite “investable” yet, but the largest pension fund in Canada is closely monitoring how the space grows and maintains value.

“The currencies themselves, I’d say it’s still early days to figure out whether this is truly institutionally investable and whether they really are liquid gold,” said Machin at an event dedicated to the CPPIB’s place in a changing world.

“It’s worth paying serious attention to it.”

After working with Goldman Sachs for 20 years, Machin joined the CPPIB in 2012 as the organization’s first president in Asia and made his move up the ranks to become president and CEO in June 2016. The CPPIB oversees a whopping $328 billion in assets divested in real estate, public, and private companies on behalf of 19 million Canadians.

Blockchain is certainly going to be something to track as cryptocurrencies like Bitcoin continue to skyrocket in value. At the beginning of 2017, one bitcoin was worth just below $1,000 USD—that price has since ballooned to $8,150 at the time of publishing. Meteoric growth like that has turned the heads of not only libertarians and tech enthusiasts, but almost everyone in the financial world, which led to Machin’s discussion on the CPPIB’s plans to introduce cryptocurrency into their portfolio.

“We’re watching it. I don’t think it’s institutionally investable yet,” he said. “It’s really early days and there’s going to be lots of disruption.”

Machin went on to say that the CPPIB has more than 100 people at its Toronto offices watching the space carefully. A lot of the discussion revolves around what kind of currency to introduce the fund to, and whether it will be one of the big three that currently trade: Bitcoin, Litecoin or Ethereum. All three have been relatively volatile in their lifetimes, but only Bitcoin has seen massive gains.

Goldman Sachs (Machin’s old stomping ground) and JPMorgan Chase just completed a six-month test into blockchain that was managed by startup Axoni. The CPPIB was a participant in the program as well. Axoni’s CEO Greg Schvey concluded the test with good news, finding that there was a 100 per cent success rate when it came to equity swaps contracts being executed.

“We’re on a path to take this forward,” he said. “We know the thing works now.”

The blockchain industry is not without its doubters, with some of the most heavy-handed quotes coming from those with the most intel.

Ethereum’s co-founder Charles Hoskinson said in July that the crypto-coin market is a “ticking time-bomb,” in reference to the controversial market of initial Coin Offerings (ICO). China recently banned ICOs, while many companies have had mixed success with them. Chat platform Kik raised almost $100 million USD with their token sale, though they excluded Canada due to regulatory issues.

“If innovation is to play an important role in Canada’s economy, we can’t afford to let this innovation go elsewhere,” said Kik Interactive’s CEO Ted Livingston in reference to the country’s inability to quickly regulate new technologies.

Local companies like Goldmoney have begun to deal in Bitcoin and Ethereum through the use of an off-site custodian that holds the currencies in cold storage, adding an extra level of security. This is a model the CPPIB may be able to follow, although the level at which the pension organization would invest is bound to be much higher than what Goldmoney operates at.

As the Canadian government addresses blockchain and cryptocurrency more openly, there’s no reason to see large firms begin to offer holding options, but there will almost always be an inherent risk when it comes to investing in decentralized currency. Whether the CPPIB take that chance remains to be seen.