Evan Thomas

2Hello, how are you?

4Well it probably comes as no surprise to anyone I'm, I'm a lawyer. I recently joined Wealthsimple to head up legal for Wealthsimple's Wealthsimple Crypto product a couple of months ago. Prior to that, I, I practiced litigation for going on 15 years for Osler in Toronto, mainly doing sort of defense side commercial class action litigation with a particular emphasis on technology-related matters. I'm originally from Western Canada, grew up in Alberta, educated in various other provinces, found my way to Toronto a few years ago and haven't left. I have my family here in Toronto, my wife and and two two kids.

6That's right. It's, it's what I mean. It can— dwelling on too many of the details technically Wealthsimple Crypto is provided by a company called Wealthsimple Digital Assets, but it is one of the products that Wealthsimple as an organization provides to Canadians in addition to Wealthsimple Invest, which is the it's a robo investing product that is the first product and I think what we're primarily known for. Wealthsimple Trade for no fee trading. Wealthsimple Tax, which assists with tax preparation. Wealthsimple Crypto being another, and then our Wealthsimple Work, which provides products for companies for their employees.

8Well, we're offering some services that are similar to other products that are already available in the market, but trying to do it in a different way and in a better way, and particularly a friendlier way. And I missed one in particular as well, Wealthsimple Cash, which is our Product for— similar to products in the US for instant money transfer. So do these services exist? To a certain extent. I mean, there are now other robo investing products. There are other low fee, no fee stock trading platforms. They're relatively few platforms that allow people in Canada, at least, to transfer money back and forth with their friends and family in an easy way. And there are crypto platforms that have allowed people to buy and sell crypto online.

9I think there are some distinguishing patterns, particularly when it comes to crypto. In that until recently, really until Wealthsimple Crypto existed, there were no regulated options for doing so. These platforms existed outside regulation in Canada. But in addition to that distinction, we like to think that the products we offer are better, they're more integrated, they're more friendly, and that they're better able to help people achieve their financial freedom, which is ultimately what our mission is all about. And all of these products are really to intended to help our customers achieve that, that objective.

11I was. I grew up in Edmonton and I was born an Oilers fan and I will die an Oilers fan regardless of how well they might do.

13however— Full of distinguished individuals. Full of distinguished individuals.

15Oh, you know, you're asking me to reach back, back into history. At that, at that time, I was I was, I was doing economics. That was what I wanted to study in university, and UBC had and continues to have a really excellent economics program. And really, who could, who could quarrel with, with living in Vancouver? I always like to say there's really only two ways of living in Vancouver. You either have to be a student or you have to be incredibly, incredibly wealthy. And, you know, at the time, and still today, only one of those options was available to me. So I decided to be a student in Vancouver and attend UBC, which was just a fantastic experience.

16It's a beautiful very livable city, and the university is, is fantastic. And like just about everybody who attends UBC, it took me 5 years to complete a 4-year degree because, you know, frankly, you're— it's hard to keep your mind on your studies.

18You know, the suspicious resume gap. Yeah, all through, all through my undergrad studies, even though I was studying economics, I was very involved in sort of technology, working in software development, systems administration, part-time summer jobs through university. And then after I came out of university right into the dot-com boom, which at least some people will remember. And worked for a couple of startups at that time doing software development. And we had, you know, what were great ideas, what I still think were great ideas. But like many, many startups at that time, eventually ran out of money. And everybody had to find other things to do. So that was when I was considering, you know, where do I go from here?

19I was very interested in the technology sector, but I didn't think that was the right path for me at that time. So decided I'd pursue and eventually go to law school, but I also wanted to continue what I'd been doing in economics. So I did the economics degree in the UK before starting law school. So that's what that— you are correct, that gap on my public profile, that's where I spent a couple of years. Doing software development for dot-coms, which ultimately did not succeed, and I had to go on another path.

21Yeah, that's right. I mean, all through law school and then through my practice in litigation in law school I took a number of courses focused on technology and innovation. And then you know, in my practice I found myself drawn to the cases that had a technology element, whether, you know, that was a privacy or data security matter, like a security incident privacy breach. Resulting class actions or some sort of investigation or enforcement matter. Commercial disputes in software projects, enforcing commercial data licensing agreements where data is being— being commercial data, not personal information— is being licensed for sale. Those kinds of disputes where I could really leverage the technical background I had, where I could speak relatively fluently with the technologists who were invariably involved in those kinds of cases, and provided a real advantage.

22And I think helped sort of build trust with the clients because I could speak to many of the key stakeholders in the language that they best understood. So from within that, I was eventually, I guess it'd be about 4 or 5 years ago, drawn to crypto in a professional sense. And this was really as the last big bull run began, we were increasingly seeing at Osler, where I was at the time, clients coming to us with business ideas that involve crypto. They required advice. A lot of things, the legal environment was unclear. To be generous. And so particularly a colleague at the time, and he's now a colleague again, Blair Wiley, Chief Legal Officer at Wealthsimple, we worked together closely on advising these clients.

23And from my perspective was advising these clients on sort of the risks, the litigation or regulatory risks that they faced, because it was predictable, and indeed it did come to pass, that eventually there would be litigation and investigations and enforcement arising out of some of the business models that were being pursued at that time. So I continued on for a number of years. That was an area of practice, acting for clients either involved in disputes, other contentious matters that had a crypto element, whether— or, you know, providing advice on risks related to their business activities. For a number of years until recently. So Blair, who was formerly a colleague at Osler, now at Wealthsimple, approached me about the the position I'm now in, which is to head up the legal side for Wealthsimple's crypto product.

25So I think for the most, most involved the longest stint was with a company, and what we were developing was a tool for integrating equipment rentals into sort of online platforms. So think of it— we certainly didn't describe it in these terms at the time, but this is how how I would— this is how I describe it now. It was basically Uber for equipment rental. So if you're at a job site, you need a forklift or, you know, sort of lighting for a job site, the idea is we go to this, this, this site, this app, and see which rental provider had the equipment you needed how far they were away from you, and what they were going to charge, and place a reservation you know, through, through this app.

26And you have to keep in mind, this was 2000, 2001 you know, these, these companies, these equipment rental companies, they had systems for you know, managing their inventory electronically, but they were, you know, they were using you know, this is where we're going to get into the real technical weeds. They were, they were, for some reason, they were all built on SCO Unix. And they weren't applications that were connected to the internet. So really what we were providing was a layer that allowed our platform to connect over the internet to the existing inventory management systems and pull data out, put data in, in order to make reservations for equipment. It was a great idea, frankly.

27I wouldn't be surprised if that exists today. We were building on a stack that would sound pretty familiar today. We were sort of a combination of Linux and Apache web servers. We were using modPerl programming in Perl and using Solaris and Oracle for the backend, for all of the database side. So that's a technology stack that would probably be relatively familiar to someone developing 20 years later, maybe not so much the Perl, but it was primarily Perl. And then we did have some elements that were built in PHP.

29I think generally, I think certainly for traditional financial institutions A lot of the way in which they've approached fintech and making their products accessible online is to, yes, build a layer that abstracts away the legacy systems, some of which are 30, maybe 40 years old, and then to put a shiny face on it. I think for fintechs like Wealthsimple, We're building things from the ground up for the most part. And we can reimagine how they should work. And then I think crypto, I would agree, it's absolutely different because it is not in any way and will never be reliant on centralized legacy systems. I think fundamentally, at an architectural level, it's not going to replicate what, what has existed historically.

31They, they— well, I'm assuming you're asking, do they feel threatened in a, in a business sense? And I suppose my reaction, if that's what you're getting at, my response would be that's business. There will always be threats from a business perspective to an existing business. There will always be new competitors. There will always be new products that pose a competitive threat. And that's just part of doing business. And while I certainly don't fault anyone for responding to those threats, defending themselves against that, because that's equally part of this, it is still just business. And it's something that traditional institutions have always and presumably always will have to deal with.

33Right. Well, I think the— let's reduce it to the original and perhaps simplest use case for crypto. That's Bitcoin. And what is Bitcoin? What was it initially conceived as? It's a peer-to-peer value transfer system. It's a way for users of Bitcoin, holders of Bitcoin to transfer value in the form of Bitcoin from themselves to someone else. And this I think is the key point without a centralized intermediary. And I think that distinction, and this is, I emphasize this for a legal audience, so many of our, leaving aside crypto, all of our interactions with financial systems are mediated by financial intermediaries. If I want to send you money held in my bank, I can do that, but I'm reliant on a centralized intermediary, my bank, to take the money out of my account and put it into yours.

34And if we drill down on it, in fact, I'm probably reliant on not just my bank, but also your bank, some other intermediaries in the process. But the transaction between me and you is intermediated by these institutions, these centralized institutions. And I think there's a key point, and I think this is what's interesting for lawyers and what's a challenge for lawyers. So much of our regulatory system is designed around the assumption that these intermediaries will always exist and that these intermediaries can be tapped to achieve policy objectives, regulatory objectives. They can be subject to regulatory supervision. They can be used to achieve different objectives, whether that is preventing money laundering, whether that is assisting with the collection of taxes, any number of policy objectives that we may all agree are laudable from a social perspective.

35But what Bitcoin challenged, continues to challenge, is the need for these intermediaries. That's what it is, I suppose, at a high level. How it does that, we don't want to, I suppose, spin off too much detail, but the idea is that Bitcoin, and I think this concept is fundamentally replicated on other types of crypto assets, it's a network. It's a network of nodes, computers, and then anyone can be a node and can participate in this network and can maintain a copy of the ledger. Because at its heart, Bitcoin is a ledger that is recording movement of value from one place to another. But instead of it being a centralized ledger, such as the one that a bank would hold, it's decentralized in the sense that all of the nodes participating in this network have a copy of this ledger.

36And so what flows from that is that then they have to keep it in sync. And that's really the innovation behind it. How do you have a ledger reflecting entries of who holds what, who is moving what to whom? How do you maintain that ledger in sync across all of these thousands of nodes, many of which whose identities are unknown, how do you maintain that sync? And that's the fundamental technological innovation behind it is how to do that is what Bitcoin accomplished, which is using means of both maintaining consensus and also protecting that against attacks from hostile parties through what is referred to as proof of work. The basic idea is this, some of the nodes on the network are what are called miners.

37Their role is to take transactions, movement of value that people want to do, bundling them into blocks, and then competing with one another compete as to what is going to be the next valid block of transactions. And I say compete, because what mining refers to is really a calculation, and without going into all of the details of it, finding a particular solution to a mathematical problem that meets certain criteria. but that is hard and that cannot be done easily. And that has to be repeated literally trillions of times a second in order to find the solution. And eventually one of the miners performing these calculations will find a solution, at which point they have found the next valid block.

38Other nodes in the network will accept that as valid, and then the process repeats itself. So Pending transactions go in, miners bundle them up to validate them, try to find a solution for the next valid block. When one of them is found, that becomes the next valid block. Everyone accepts that and the process repeats itself. In Bitcoin, it can take literally quadrillions of attempts, and on average about 10 minutes to find a solution for each block. But it's that work, it's the fact that that is so much work that has to be done collectively that it protects the network. It protects the integrity— sorry, it protects the integrity of the ledger because if someone wanted to reverse a transaction and rewrite history, they'd have to redo all of the work that has been done.

39And The concept is that should be practically infeasible to accomplish by a hostile actor. So as more and more blocks are added to the chain, it becomes harder and harder to undo what has happened in the past. And so that's how everyone can stay in sync. And that's how everyone can be confident that the ledger, the copy of the ledger they hold is in fact the correct one. And that was the innovation, how to keep all of these decentralized parties who don't know one another's identities, who don't necessarily trust one another to stay in sync. And that's the fundamental technological innovation. And that's how it achieves what it was intended to do, which was to allow transfers of value without there having to be a bank with its central ledger moving and manipulating ledger entries to transfer value from me to you.

41I think it's a combination of things. I think, I mean, just speaking myself. You know, law— I think we can all agree that law is conservative in the sense that it's not prone to innovation. I mean, the whole idea, the whole system is based on precedent, looking at the past, what has happened in the past in order to provide advice about the future. So it's not prone to revolutions or upheavals. Every so often, new areas of law will emerge that challenge the status quo, that are an upheaval of sort. I suppose that, you know, I would suggest that in a generation of lawyers before you and me, you know, privacy law was such an area, an area of law that really didn't exist until the late 1990s, early 2000s, but now is an area of law that permeates so much of our everyday lives.

42There are dozens, hundreds of exceptionally talented lawyers who specialize in privacy, but it's an area of law that just didn't exist a generation ago. 30 years ago, other than in perhaps the most nascent sense. So, you know, when that happens, it creates all sorts of interesting issues to be considered, to be advised on, and frankly, opportunities. It's always more exciting and potentially more rewarding to be practicing in a new and growing area, particularly if there are really interesting legal problems in it. And fundamentally, I strongly believe that crypto, digital assets, blockchain, whatever you want to call it, that is a technology that is profoundly affecting many areas of law. Fundamental concepts of property law, certainly securities law, certainly anti-money laundering, in banking law, tax law.

43You can already see impacts in family law and estates law. As digital assets, as blockchain continues to grow in terms of adoption by the general public, there are going to be novel legal issues that will percolate up across virtually any area of law that you can think of. And that's going to require lawyers to think about the technology and how it's being used and the legal issues created. And there really is no playbook, as there are some fundamentally different features of digital assets or crypto assets that challenge a lot of foundational assumptions of the law. And just to give an example, So much of our system of financial regulation is based on the regulation of intermediaries, banks, securities dealers, those sorts of entities.

44But blockchain and crypto permits not just the transfer of value, but increasingly more complex transactions, financial transactions to be performed without such an intermediary, which is a real from a policy perspective is a real regulatory challenge because how then can regulators exercise supervision? Who do they regulate if there are no intermediaries? And what you instead have are individuals and entities transacting with one another using addresses, blockchain addresses that are just a mix of letters and numbers. How do you regulate that kind of system? So that's a profound challenge in that area, but those challenges exist in other areas of law and will continue to crop up. And that's really, I think, for me, what drew me to it.

45There are just going to be so many really interesting legal issues that are going to require a complete— just like a completely new way of looking at how to apply the law, how to draft the law, and how to advise clients. So that's really what drove me. And I think from others I know who advise in this area, it's that intellectual challenge that has attracted them as well.

47Oh, it's hard to— certainly there are, there are elements of of both in my role. There are— we— and I'll just provide a bit of context. As I mentioned, historically, there were always platforms, including ones operating in Canada, that allowed customers to buy and sell crypto assets, Bitcoin, online. And I think most people will at least have heard of QuadrigaCX, which collapsed in 2019, was insolvent, had to seek ultimately bankruptcy protection and investigations by regulators. And the trustee determined that fundamentally it was a fraud perpetrated by its founder and directing mind. But Quadriga was not subject to regulation in the sense it wasn't registered with a securities regulator or really any other type of regulator, because at the time there was no law or framework that applied to these types of businesses.

48Now, shortly after, in the wake of that, shortly after Quadriga collapsed in 2019, Canadian securities regulators and IIROC began a process initiated by a discussion paper of as to their jurisdiction to regulate platforms like QuadrigaCX. And this led— and I sort of skipped to the end— Canadian security regulators take the view that platforms that are buying, selling, and holding crypto assets for their customers, in the sense that they hold wallets that have the crypto assets for their customers, effectively acting like a crypto bank, are engaged in activities subject to securities laws, and therefore have to be registered under securities laws and are subject to regulation by provincial and territorial securities regulators and IIROC. So now this is a transition.

49The Wealthsimple Crypto was the first platform to obtain a registration under Canadian securities laws, and that was, that was in August of 2020. More recently, in fact, just last week, another, another platform secured the second such registration, and Canadian securities regulators, in particular the OSC, have made it clear to the industry that any platform, whether in Canada or outside of Canada, that is dealing with Canadians in terms of buying, selling, and holding crypto assets has to comply with Canadian securities laws and register. So there are a number of other platforms, both in Canada and presumably outside of it, that are going through the process of registering and bringing themselves into compliance with Canadian securities law.

50But at this time, there are really only two that are fully registered. So we have terms and conditions that apply to To us, there is a certain element of— obviously, we have to comply with the obligations that apply to us. And then there are a variety of other matters that we have to comply with. Again, relatively recently in the last year, year and a half, anti-money laundering laws have been more explicitly applied to anyone who deals in virtual currency. So We and any other platform dealing in virtual currency has to comply with sort of federal anti— with Canadian federal anti-money laundering laws. We obviously have commercial relationships that have to be negotiated and maintained with custodians and liquidity providers and other service providers that help us provide the product.

51So there are certainly compliance and commercial responsibly. But we're also, as I say, this space is very, very, very new, and even the regulatory bodies are consulting, seeking ideas of how to regulate. So there's a certain element of the role that I'm also involved in, speaking with regulators about how the space should be regulated, because there are new issues that come up frequently where there really isn't a clear analog under securities laws, i.e., that is a requirement that applies to traditional securities, equities, bonds, that can be applied logically to crypto assets. Sometimes there are differences and the rules have to be modified or applied in a different way. So there is a fair bit of that.

52And that does involve advocacy as to what is the best way from a policy— a best way of achieving a policy objective. And then there is just simply the— more esoterically, as new applications and technologies come down the pipe, without going into all the details, As we see the emergence of decentralized finance protocols, as we see proof of stake chains come into adoption, there are going to be all sorts of legal issues, securities legal issues, tax legal issues arising out of those technologies. And to the extent that we make them part of our product, we're going to have to work through those issues. And that's going to involve an element of advocacy as well.

55Well, you know, I mean, just sort of objectively it's the process— leaving aside any connection to, to to crypto— the setting up a new bank in Canada, frankly in any jurisdiction, is a considerable effort. It's, it's no small no small small feat. And I think generally that's reflected in— you know, my knowledge of banking regulation is limited, but my perception at least is there have been very few new banks generally in Canada in light of the competitive environment, the regulatory requirements, you know, the market opportunity. But I think that just in terms of crypto, If all that is required is means for clients to effect payments, to buy and sell crypto, then setting up a whole new bank for that process is perhaps overkill.

56I think what we have seen, and this has occurred recently, We have seen the emergence of other kinds of regulated entities, specifically trust companies. There's a new trust company in Alberta, Tetra Trust, that has been established with the objective of holding crypto assets as a custodian. And we may see others. But that's solving, I suppose, a different problem, less about payments and providing payment rails for crypto, but providing a means for crypto assets to be held in a recognized regulatory framework. So the other— banks and trust companies also provide an important function. Leaving aside sort of consumer payments, in terms of holding assets for their clients and being subject to prudential regulation by provincial trust regulators or OSFI.

57And that is necessary to comply with securities laws as well as other laws. But I guess to your point, we are seeing that and we may see more of it. As to whether that is something Wealthsimple would eventually do, I can't comment, but I wouldn't say that it's not happening and there isn't movement in that direction, certainly on the custodial side. Whether or not we'll see someone set up a pure crypto bank, I don't know. I'm not sure if there's necessarily a product-market fit for that, but who knows? But I would say as a general comment, In general, the securities regulators have been more advanced in their thinking around how to regulate crypto assets within their sphere of jurisdiction.

58I think now starting to see regulators like OSFI, Prudential regulators, starting to think about digital assets more. But whereas the securities regulators have been looking at this field for at least a few years. It does seem that the Prudential regulators are only more recently starting this kind of policy exercise of monitoring the area and seeing what rules might need to change or otherwise be adapted.

60Oh well, you know, it's I think, I think like, I think like most most people in the last year and a half, particularly those who you know, have, have younger kids who spend a lot of time with their, their kids and that's certainly been my, my, my experiences whether that's going for a, going for a bike ride with kids or playing sports, soccer, something else for my kids. That's generally where I spend my time. Certainly in the last year, and I do think particularly in the last year of the pandemic, it has renewed my appreciation for the outdoors and getting out of the city. So whenever possible, I enjoy that.

61And, you know, But for the pandemic, I would also like to travel more. I took my first flight in over 2 years you know, just a couple of weeks ago, but I hope to get back to that eventually, more frequently at least.

63Oh, thanks so much for having me on. It's always a pleasure to talk about this stuff. As you, as you can tell, I do enjoy speaking about it, and you give me an opportunity and I will talk your ear off. But thanks very much for giving me the time.