Around the world, many countries are actively pursuing laws and regulations to provide a legal framework for cryptocurrency. Many are providing a positive path toward acceptance, although a few have still not come to terms with the role digital currency plays in the larger financial ecosystem. Jason Simon, a FinTech and cryptocurrency expert, recently shared his insight on the state of regulations around the globe and now provides details on how Canada is addressing cryptocurrency.
Canada is one of many countries that is working on the development of guidance to introduce a legitimate and legal path for the use of cryptocurrency. Explains Simon, “Canada has already created laws regarding how digital currency should be taxed, although it has not yet defined cryptocurrency as legal tender. This is seen in most countries that are working on the legalization of digital currency, and which are still not ready to put it on the same level as accepted fiat.”
The Financial Consumer Agency of Canada states that digital currencies can be used to buy goods and services on the Internet, as well as in physical stores where accepted. It also explains that digital currency can be bought and sold on open exchanges, with the Canada Revenue Agency adding that, for tax purposes, cryptocurrency is a commodity and not a government-issued form of money. Currently, only bank notes issued by the Bank of Canada or coins issued under the Royal Canadian Mint Act can be considered legal tender.
Canada was one of the first to establish regulations for the use of cryptocurrency. In 2014, the Governor General of Canada approved a bill, Bill C-31, that amended the country’s Proceeds of Crime (Money Laundering) and Terrorist Financing Act. As a result, cryptocurrencies are viewed as “money service businesses as they pertain to anti-money-laundering laws. This was the first time any nation established a law on digital currencies and is recognized as the world’s first legal acceptance of digital currency as it pertains to financial transactions.
Canada has continued to update its cryptocurrency laws since then, including how it is defined as it pertains to security laws. Simon adds, “In August 2017, the Canadian Securities Administrators provided an update on how securities law requirements apply to things like initial coin offerings (ICO), initial token offerings, cryptocurrency investment funds and more.
This established clear-cut guidance for how initiatives like an ICO could be conducted and what an issuer’s responsibilities are in terms of the law. The update has gone a long way to protect consumers, even though there have still been some isolated abuse, such as that involving the failed Quadriga cryptocurrency exchange two years ago.”
As the cryptocurrency industry has evolved, Canada has continued to support it, being the first to approve a blockchain exchange-traded fund (ETF). That came in February 2018, when the Ontario Securities Commission gave a green light to the Blockchain Technologies ETF, and more investment funds have emerged since then. In the middle of last month, the Ontario Securities Commission approved another ETF, this one from Evolve Funds. It is listed on the Toronto Stock Exchange under the ticker symbol EBIT, and was seen as a potential catalyst for the introduction of cryptocurrency ETFs in the US.
In another example of Canada’s positive reaction to digital currency, a new stablecoin is being introduced by VersaBank. Simon states, “The VCAD stablecoin is being introduced by VersaBank, a bank located in Canada. VCAD will be backed by Canadian dollars, making it the first digital currency issued and backed by deposits through a bank in North America. This is another example of the constantly evolving role digital currency has in the financial ecosystem, and the next couple of years will see even more progress made.”