The price of Bitcoin dropped below $9,000 in the evening hours of February 1. Bitcoin has now lost more than half of its value since peaking at over $20,000 in mid-December. Back in October, Royal Bank of Canada (TSX:RY)(NYSE:RY) warned that Bitcoin carried significant risks but expressed some enthusiasm for its potential. Royal Bank has also taken significant steps to explore blockchain technology to facilitate transactions in the future.

A broad sell-off was triggered after South Korea announced that it would pursue a crackdown on cryptocurrency exchanges. More intense banking regulations were then announced by China and India, and there was the promise that Germany and France would propose a new set of regulations to the G20 in March. A global effort to stifle the disruptive power of cryptocurrencies has seemingly made a big impact early in 2018.

A flurry of regulations is expected to follow in what could put even greater downward pressure on Bitcoin and other digital currencies. Finance Minister Bill Morneau has said that Canada will look at the risk factors for Bitcoin and other cryptocurrencies. However, Morneau has said that there are no new policy proposals on the horizon. On the contrary, the Canadian government appears to be welcoming the potential that blockchain technology could hold going forward.

Coinsquare, the leading platform for trading Bitcoin, Ethereum, and other cryptocurrencies in Canada, is reportedly exploring an IPO set for release in September of this year. According to reports, Coinsquare is looking to raise about $150 million for the IPO in order to finance international expansion. CEO Cole Diamond has laid out ambitions for Coinsquare to compete with Coinbase and others in the United States and the United Kingdom.

The timing for Coinsquare is encouraging considering the turbulence in the cryptocurrency market right now. Long Blockchain Corp. (NASDAQ:LLBC), formerly Long Island Iced Tea Corp., is a U.S.-based company that shifted its focus overnight to blockchain research. The stock spiked over 500% in December and hit an all-time high of $9.49. It closed at $3.04 on February 1, returning to levels seen when it was an Iced Tea company.

Cole Diamond is confident that Canada could become a “central source” for cryptocurrency mining. Cryptocurrency mining uses a significant amount of energy in order to power the blockchain. Low Canadian temperatures and cheap energy prices make it a highly attractive destination for cryptocurrency mining.

China has launched an aggressive crackdown on cryptocurrency exchanges. At one point, over 90% of Bitcoin global trading volume originated from mainland China. According to Diamond, many of these miners are now focusing on Canada as their next destination.

The upcoming legalization of recreational cannabis and the subsequent explosion of cannabis stocks has shown that Canada is willing to take steps into industries that other countries have shied away from. Although it appears the Bitcoin and cryptocurrency mania is undergoing a significant cool-down, digital currencies and blockchain technology look to have a promising future.

Investors should be watching international developments closely. Although cryptocurrencies remain a very risky bet in this uncertain regulatory environment, the potential Canada has as a destination for the development of blockchain technology is something to be very excited about.