Source: Piqsels
Canada-based readers interested in buying and selling cryptocurrency should read this article detailing the current regulatory landscape for cryptocurrencies and cryptocurrency exchanges in 2021. Although at the time of writing cryptocurrency is not considered legal tender in Canada, its federal government is still experimenting with its underlying blockchain technology and the potential of a central digital currency for the Bank of Canada.
In addition, it is permitted to pay for goods and services online or in-store using cryptocurrency, wherever these digital assets are accepted by businesses and retailers. Although cryptocurrency is not yet legal tender in Canada, the North American nation has been more active than most in its approach to cryptocurrency. It was the first country to approve anti-money laundering (AML)-linked regulation of cryptocurrency. In the first instance, Canada regulated crypto providers and exchanges under provincial securities legislation, labelling them as money service businesses (MSBs).
By January 2018, the head of the central Bank of Canada moved to label cryptocurrencies “technically” like conventional securities. Stephen Poloz, governor of the Bank of Canada, warned in an interview with cnbc.com that Bitcoin trading was still a form of “gambling” and required regulations to protect the best interests of Canadians. Mr Poloz said at the time that cryptocurrencies have “no intrinsic value”.
Is a cryptocurrency a security in Canada?
Defining whether a cryptocurrency is a security or not in Canada relies on Canadian securities legislation, founded by the Canadian Supreme Court. Its “Investment Contract Test” requires all four aspects to be satisfied to be considered a security:
- An investment of money must be made
- The investment must be made with the view to securing a profit
- It must be deemed within a common enterprise
- The potential failure or success of this asset is affected by third parties rather than the investor
How are cryptocurrency exchanges treated in Canada?
Source: Piqsels
When it comes to cryptocurrency exchanges, these are also becoming increasingly regulated in the Canadian market. Two regulatory groups have published fresh guidance on securities legislation for exchanges – known technically as crypto-asset trading platforms (CTPs). Financemagnates.com recently revealed the viewpoint of the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC), including mandatory licensing for platforms in control of client funds. Meanwhile “non-custodial” platforms may be able to apply for registration exemption, so long as margin or leveraged crypto trading is not offered.
The number of cryptocurrency exchanges in Canada is rising exponentially. You only have to look at BuyBitcoinWorldwide.com to see that – as of May 29, 2021 – there are nine active platforms serving Canadian crypto traders.
Some of these platforms are working hard to abide by Canadian laws and regulators. Take Satstreet for example, which is now deemed a compliant and regulated MSB in the eyes of Canada’s Financial Transactions and Reports Analysis Centre (FinTRAC). The Vancouver-based Netcoins is another Canadian crypto exchange that has achieved MSB compliance in the eyes of FinTRAC. Netcoins is a fully audited platform, offering one of the deepest liquidities in Canada’s crypto space.
As a matter of fact, all reputable MSBs have been required to be fully audited and registered with FinTRAC since the start of this month. In terms of future cryptocurrency regulations, it’s certain that the industry and the federal government will take time to assess the latest legislative changes before making any hasty moves.
