Where are we today, where are we going?

Digital currency is quickly becoming the mainstream of Canadian finance. In addition to increasing adoption rates, Canada has also been relatively successful in creating a stable regulatory environment. In 2014, when the Canadian Parliament became the world’s first government, Canada established itself as a leader in global digital assets. after National laws on digital currencies. Since then, Canadian regulators have been quite positive about cryptocurrencies, taking a cautious and optimistic stance, trying to promote innovation while protecting the interests of investors.

Regulatory support for digital asset innovation

In particular, compared with other international jurisdictions that implement stricter policies or adopt a more laissez-faire attitude, Canada’s support environment for cryptocurrencies is reflected in some of the options offered to startups experimenting with digital asset technology.

For example, the sandbox program of the Canadian Security Association (CSA) stand by Financial technology (fintech) companies seek to provide innovative products by carefully reviewing business models in a real-time test environment. Similarly, the Ontario Securities Commission (OSC) LaunchPad works Cooperate with financial service companies to align regulation with digital innovation, and encourage the development of products, services, and applications that meet the compliance standards required by the Securities Law.

In addition to these services for innovators who wish to work directly with financial authorities in the context of their specific business models, regulators have also issued extensive and comprehensive guidance to guide the applicable legislative framework.

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The dichotomy of digital asset supervision

Since the establishment of the encryption industry, regulatory requirements have polarized the encryption industry. Investors and companies desire processes and must have a regulatory framework for this. On the other hand, an over-regulated economy may prevent Canadians from integrating into the wider digital asset industry, thereby forcing overseas investment. So, what is a good balance between the two?

Early advocates of blockchain believed that its unique disintermediation characteristics made it immune to regulatory influences, and believed that cryptocurrency was created to solve the strict public supervision of the financial market. Under this assumption, many token issuers before mid-2017 largely ignored the securities law registration requirements designed to protect investors and promote fair markets.

However, reliable legal remedies are necessary to protect individual rights and are an integral part of a functionally responsible jurisdiction. Especially in the financial sector, individuals are extremely vulnerable to risks. Regulation can minimize consumer harm and is essential to maintaining market integrity.

For example, it has now been determined that Canadian companies handle cryptocurrencies (such as cryptocurrency exchanges) Must be registered Canadian Financial Transaction and Reporting Analysis Center (FINTRAC) acts as a money service company (MSB). Registration means that these companies are subject to regulatory and reporting requirements. Because of these legislative obligations, fraudsters are more likely to be squeezed out of space to make room for legitimate participants who can provide a higher level of investor protection. This legalization of the digital asset industry is the main reason why trading platforms welcome incremental supervision; constructive cooperation with each other to improve security and transparency, while not stifling an industry that is still in its infancy.

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Therefore, policy makers play an important role in developing the necessary conditions to create a framework suitable for the safe operation of cryptocurrencies. CSA jurisdiction and Canadian Investment Industry Regulatory Organization (IIROC) expression It is interested in working closely with digital asset trading companies to understand their views, consider the key risks of innovation, and ensure investor protection is not compromised.

Regulations of this scale cannot be rushed. Regulators have considered several factors to ensure that any new legislation will only encourage the digital asset industry to flourish. 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—strict enough to protect investment and fraud, and enough to allow private and international digital asset companies to flourish.

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Canadian regulatory trends in 2021

In terms of integrating cryptocurrency into traditional investment, Canada has made significant progress in sanctions against Bitcoin (Bitcoin) And ether (Ethereum) In 2021, exchange-traded funds will give more mainstream investors the opportunity to access digital assets through their investment accounts, including tax-friendly registered retirement savings plans (RRSP) and tax-free savings accounts (TFSA).

Canada has also set a precedent for hopes to be competitive in this field by allowing digital asset exchange-traded funds (ETFs) to surpass the United States. In February, Purpose Financial LP’s Bitcoin ETF accumulation More than US$400 million in assets under management in the first two days Break through the 1 billion U.S. dollar mark Within two months after release.

As the investment portfolio grows, people will think that tax-related issues may arise. However, the Canadian tax authorities are quite aware of the tax implications and have provided investors with sufficient guidance in the process. Currently, Canadian tax laws and rules, including the Income Tax Act, also apply to cryptocurrency transactions.

The Canada Revenue Agency has Features Cryptocurrency is a commodity, and means that the use of cryptocurrency to pay for goods or services should be regarded as a barter transaction. Since cryptocurrency is regarded as a commodity, it prevents unfavorable tax misreporting. However, the situation is constantly changing, so regulators must maintain a leading position to prevent crypto enthusiasts from viewing the United States, Europe, or Asia as alternative playgrounds, thereby draining Canadian talent and investment.

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Canada is still a miner’s paradise

Due to climate, electricity supply, and light regulation, Canada is the top choice for crypto miners. The hardware used by cryptocurrency miners generates a lot of heat and needs to be cooled to prevent overheating, and being located in a relatively cool climate like Canada can help reduce the cost of cooling computers.In addition, the power supply Rate Is one of them in Quebec lowest In North America.For industrial consumers, the rate is about US$0.05 per kWh. Energy consumption is the main cost of cryptocurrency miners. Understandably, this is the primary reason why they are attracted to Canada.

Finally, Canadian digital asset companies can not only provide transactions, but also own and operate crypto mining facilities. Canada provides a safe haven for miners from politically and financially unstable environments to conduct business within a relaxed framework, putting the country at the forefront of the digital currency revolution. Miners from previously heavy encrypted quarries like China are looking for favorable pastures with less regulation, and now see Canada as a profitable alternative.

In the long run, there is also a sense of sustainable development, while the traditional financial industry relies on carbon-based energy, and digital assets are easily developing in the direction of greener energy.This is further comfirmed Square’s report on the Bitcoin Clean Energy Program-a unique energy model that enables the installation and capacity of more sustainable solar and wind power generation methods. Canada is a global leader in the procurement of renewable energy, and a flexible regulatory framework around cryptocurrencies may mean that a large number of international participants are flooding into the “true north”.

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What is the future of crypto regulation?

Since the digital asset space is native to the Internet, fintech platforms can be established anywhere in the world. This globalization of the financial industry means that Canada cannot simply wait for a regulatory framework to be available or it will fall behind in the innovation race. Regulators have the responsibility to incentivize digital asset investment and project development in their country.

It is a solid first step to familiarize yourself with digital asset trading in the Canadian market by introducing more encrypted asset trading platforms. In the next ten years, the industry will introduce more regulation. Smart and forward-thinking governments will see a clear opportunity to provide clear but not overly restrictive supervision and become a welcome place for digital asset projects.

Historically, authoritarian governments — hostile and unstable rulemaking that has a net negative impact on their economy — are more likely to impose stricter measures on digital assets, which may inevitably force industry participants to move to Canada, etc. Countries that provide relatively favorable conditions. Digital asset companies will continue to move to where they are most welcome, and the countries that promote these actions will be better able to benefit from the digital asset industry as it continues to grow and threaten traditional finance.

This article does not contain investment advice or recommendations. Every investment and trading action involves risks, and readers should research on their own when making a decision.

The views, thoughts, and opinions expressed here are only those of the author, and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Celie Smith He is a Canadian lawyer who is passionate about emerging technologies and innovation. Fintech and blockchain are her main expertise. She is currently the director of business and legal affairs at Coinsquare, a Canadian cryptocurrency exchange. In addition to his position at Coinsquare, Desiree also teaches an encryption course at Ryerson University that focuses on legal, governance, risk, and compliance issues surrounding blockchain, smart contracts, and cryptocurrency technology.