On June 26, Cointelegraph published an article titled “Crypto in Canada: Where are we today, and where are we heading?” by Desiree Smith.
Desiree Smith is a Canadian lawyer. He is currently the Director of Commercial and Legal Affairs of Coinsquare, a Canadian cryptocurrency platform. He also teaches a cryptocurrency course at Ryerson University, focusing on blockchain, smart contracts and cryptocurrencies. Technical legal, governance, risk and compliance issues.
This is a Canadian exploration of one pair of encryption state of the world, as well as for the future of the industry analysis of Canadian Crypto assets, Crypto assets in regulatory and compliance content may have some reference, block chain vernacular translation of the full text, The following is the translation content (with slight adjustments):
Digital currency is rapidly becoming the mainstream of Canadian financial sector. In addition to increasing adoption, Canada has also successfully created a stable regulatory environment.
In 2014, the Canadian Parliament became the world’s first government to pass a national law on Crypto currency , establishing Canada’s leading position in the global Crypto asset field.
Since then, Canadian regulators have been quite positive about cryptocurrencies, adopting a cautious and optimistic stance, trying to promote innovation while protecting the interests of investors.
01Regulatory support for Crypto asset innovation
Compared with other international jurisdictions that implement stricter policies or have a more laissez-faire attitude, Canada’s support environment for cryptocurrencies is reflected in some of the options provided for start-ups experimenting with Crypto asset technology .
For example, the Sandbox Program of the Canadian Security Association (CSA) supports financial technology companies seeking to provide innovative products by carefully reviewing business models in a real-time test environment.
Similarly, the Ontario Securities Commission (OSC) , Canada’s largest securities regulator , has initiated cooperation with financial services companies to align supervision with Crypto innovation and encourage the development of products, services and applications that meet the compliance standards required by the securities laws.
Innovators hope to directly cooperate with financial authorities in the context of their specific business models. In response to such needs, Canadian regulatory agencies have not only provided the above-mentioned services, but also issued broad and comprehensive guidelines under the legal framework applicable to them.
02Disagreements on Crypto asset supervision
Since the establishment of the encryption industry, the demand for supervision has been polarized. Investors and companies urgently need a compliant process, for which there must be a regulatory framework.
On the other hand, an over-regulated economy may isolate Canada and fail to integrate into the broader Crypto asset industry, thereby forcing them to invest overseas.
So, how can we achieve a good balance between the two? Early advocates of blockchain believe that its unique disintermediation feature makes it immune to regulatory influences, and that cryptocurrency is to solve the problem of financial markets. Created under strict public supervision .
Under this assumption, many issuers before mid-2017 largely ignored the securities law registration requirements designed to protect investors and promote fair markets.
However, reliable legal measures are necessary to protect individual rights and, functionally speaking, are an indispensable part of responsible jurisdiction. Especially in the financial sector, individuals are extremely susceptible to risks. Supervision can minimize losses to consumers and is essential to maintaining market integrity.
For example, it is now well known that companies related to the Canadian crypto industry must register as a money service company (MSB) with the Canadian Financial Exchange and Reporting Analysis Center (FINTRAC). Registration means that these companies are subject to regulatory and reporting requirements.
Due to legislative requirements, fraudsters are more likely to be squeezed out of the market, making room for legitimate participants who can provide a higher level of investor protection.
This legalization of the Crypto asset industry is the main reason why platforms welcome progressive supervision: without stifling an industry that is still in its infancy, constructively cooperate with each other in an effort to improve security and transparency.
Therefore, policy makers play an important role in developing the necessary conditions to create a framework suitable for the safe operation of cryptocurrencies. CSA jurisdictions and the Investment Industry Regulatory Organization of Canada (IIROC) have expressed interest in working closely with Crypto asset companies to understand their views, consider the key risks of innovation, and ensure investor protection is not compromised.
Regulations of this magnitude cannot be rushed. Regulators have considered several factors to ensure that any new legislation will only encourage the prosperity and development of the Crypto asset industry. Allowing Canada to operate as a successful cryptocurrency venue while protecting investment safety and preventing fraud are some of the key elements of the proposed regulatory framework.
The best point of regulation lies between the two -it must be strict enough to protect investment and fraud, but also sufficient to allow private and international Crypto asset companies to flourish.
03 Canadian regulatory trends in 2021
In terms of the integration of cryptocurrency and traditional investment, Canada approved Bitcoin (BTC) and Ether (ETH) platform funds in 2021, which gives more mainstream investors the opportunity to have Crypto asset exposure through their investment accounts . Including registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs) that enjoy tax benefits.
Canada has also surpassed the United States by allowing Crypto asset platform funds (ETFs). In February of this year, Purpose Financial LP’s Bitcoin ETF accumulated more than US$400 million in assets in the first two days of listing, and broke the US$1 billion mark within two months of listing.
As the investment portfolio increases, there are concerns that tax-related issues may arise. However, the Canadian tax authorities are quite clear on tax issues and provide sufficient guidance to investors in the process. Currently, Canadian tax laws and rules, including the Income Tax Act, also apply to cryptocurrencies.
The Canada Revenue Agency defines cryptocurrency as a commodity and stated that the use of cryptocurrency to pay for goods or services should be regarded as an exchange of goods. Since cryptocurrency is regarded as a commodity, it prevents unfavorable misreporting of taxes.
However, the situation is constantly changing, so regulators must stay ahead to prevent cryptocurrency enthusiasts from viewing the United States, Europe, or Asia as alternative playgrounds, thereby depleting Canada’s talent and investment.
04 Status of Canadian Mining Industry
Due to climate, power supply and lighting regulations, Canada has always been attractive to mining. The hardware used by cryptocurrency miners generates a lot of heat and needs to be cooled to prevent overheating. Being located in a relatively cool climate like Canada can help reduce the cost of cooling computers.
In addition, Quebec is one of the regions with the lowest electricity prices in North America. For industrial consumers, the electricity price is about US$0.05 per kWh. Energy consumption is the main cost of cryptocurrency miners and the primary reason why they are attracted to Canada.
Finally, Canadian Crypto asset companies can not only provide exchange services, but also own and operate crypto mining facilities. Canada allows miners to conduct business within a relaxed framework, putting Canada at the forefront of the Crypto currency revolution.
In the long run, people have confidence in sustainable development, while the traditional financial industry relies on carbon-based energy, and Crypto assets are easily developing in the direction of green energy . Square’s report on the Bitcoin Clean Energy Initiative further confirms this.
The Bitcoin Clean Energy Initiative is a unique energy model that can make the installation and capacity of solar and wind power more sustainable. Canada is a global leader in renewable energy, and a flexible regulatory framework around cryptocurrencies may mean that a large number of international participants flood into the “true north”.
05What is the future of cryptocurrency regulation?
Since the Crypto asset space is based on the Internet, fintech platforms can be established anywhere in the world. The globalization of the financial industry means that Canada cannot simply wait for a regulatory framework to emerge, otherwise it will fall behind in the innovation race.
Regulators have the responsibility to encourage Crypto asset investment and project development in their country. It is a solid first step to familiarize yourself with Crypto asset exchange in the Canadian market by introducing more crypto asset platforms. In the next ten years, the industry will introduce more supervision.
Digital asset companies will move to popular places, so that countries that promote these actions will better benefit from the Crypto asset industry.