How Cryptocurrency Is Regulated In Canada

Canada is joining the league of Nations, which has various crypto regulations. They include the United States, Bahrain, United Arab Emirates, etc.

Canada became the first country to embrace the Anti-money Laundering law.

Crypto tokens are not legal tenders in Canada but are accepted for payment and transactions across the country.

In 2013, Canada introduced the first crypto tax law under the Canadian Tax Act of 1990.

In 2017, the Canadian Security Administration announced that the existing security law would cover cryptocurrencies.

Since June 2020, all Cryptocurrency exchanges and transactions in Canada are now considered Money Service Businesses.

The first regulation on cryptocurrency is the Financial Transaction and Reports Analysis Centre of Canada (FinTRAC), followed by the Virtual Currency Travel Rule and the Initial Coin Offering (ICO) regulations.

Just 3.2% of the Canadian population are cryptocurrency holders.

Recently, we have seen several countries formulating one policy or the other toward regulating cryptocurrency in their jurisdiction. These regulations vary among countries and could either stand alone or be infused into existing law.

Over the years, we have seen countries like the United States, Bahrain, United Arab Emirates, and Nigeria making regulations on crypto activities in their country. Similarly, we have seen international organizations like the European Union formulating policies for crypto activities.
Our spotlight today shall be on Canada and its various regulations on cryptocurrency.

Let’s begin!

Cryptocurrency in Canada

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Canada has remained one of the crypto-friendly nations over the years. It is the first country that approved and embraced the Anti-money Laundering related regulation for crypto service providers.

Cryptocurrency is not a legal tender in Canada. However, you can use crypto tokens to make purchases or exchange them for goods and services in stores that accept them in Canada. This was contained in the directives issued by the Canadian Securities Administrators.

In 2013, Canada introduced the first cryptocurrency tax and began to deduct tax on crypto earnings and transactions. Crypto transactions are taxed under the Canadian Income Tax Act of 1990. In 2014, Canada included cryptocurrency in the proceeds of crime (Money Laundering) and the Terrorist Financing Act.

The inclusion of cryptocurrency in this law made it the first national law directly applied to digital currencies. The Crime and Terrorist Financial act does not apply to Canada-based crypto activities but includes all crypto exchanges that direct their services to Canadians.

In 2017, the British Columbia Securities Commission registered the first investment with only crypto tokens. In the same year, the Canadian Securities Administration (SCA) announced that the security laws that existed then will now cover cryptocurrencies.

As of June 2020, all cryptocurrency exchanges and payment processors are legally recognized as Money Service Businesses (MSB) in Canada. According to Triple A, about 1.2 million Canadians own cryptocurrency, making up 3.2% of Canada’s total population.

Canada is considered a crypto-friendly nation, and all policies and regulations are easy to abide by. It is, therefore, pertinent at this juncture to identify the various crypto regulations in Canada.

Cryptocurrency Regulations In Canada

As we mentioned earlier that cryptocurrency exchanges are legally recognized as Money Service Businesses; therefore, all regulations that apply to Money Service Businesses apply to Cryptocurrency exchanges. That is, they both require due diligence, reporting, verification, and record keeping.

The First Regulation is the FinTRAC registration

From June 2021, all cryptocurrency exchanges in Canada must be duly registered under the Financial Transactions and Reports Analysis Centre of Canada (FinTRAC). The cryptocurrency platform has to comply with all requirements for market valuation and margin that are applicable.

This rule was announced in June 2020, and all cryptocurrency platforms had the privilege of a whole year to comply.

The second regulation is the Virtual currency Travel Rule

In February 2020, the Canadian Government’s Virtual Currency Travel Rule took effect. This rule covers all money service businesses, financial institutions, and cryptocurrency providers. These entities must record cross-border cryptocurrency transactions and all cross-border electronic fund transfers. The Law gives the Canadian Government the power to request these transaction details at any time.

The Virtual Currency Travel Rule implies that all cross-border crypto transactions and operations must meet the same due diligence and other requirements of the Proceeds of Crime and Terrorist Financing Act of 2014.

The law is essentially made to prevent and discourage money laundering using cryptocurrencies. It regulates and provides measures for international monetary transactions involving Canadians and Canadian institutions.

The third Regulation is the ICO regulations of cryptocurrency in Canada

The Canadian Securities Administrators (CSA) Notice 46-307 of cryptocurrency offerings also outlines initial coin or token offerings regulations. It highlights whether an Initial Coin Offering (ICO) counts as a security or a software product.

The regulation allows the Canadian Securities Administrators (CSA) to decide whether an Initial Coin Offering (ICO) involves securities on a case-by-case analysis. So far, the CSA has treated most ICOs as securities with a few exceptions.

Lastly, Crypto mining regulations.

Cryptocurrency mining is a legal venture in Canada, and the Canadian Government has no sanction or restriction against crypto mining.
Albeit, in Quebec, Hydro-Quebec has reduced the energy consumption of cryptocurrency miners to 300 megawatts. Quebec is an energy provider in Canada, and they are aware of the great deal of energy that mining consumes, so to forestall electricity breakdown, Quebec is limiting the energy consumption of miners.

Conclusion

Canada’s cryptocurrency regulation is one of the friendliest regulations in the world. Amidst the illegal activities conducted using crypto tokens, the Canadian Government has not tightened these regulations.

In March 2021, the Canadian Government released a joint public notice through the Canadian Securities Authority (CSA) and Canada’s Investment Industry Regulatory Organization (IIROC). The public notice reaffirmed the stance of Canada to continue regulating cryptocurrency activities.

In Canada, every Canadian cryptocurrency trader is mandated to pay tax. As a cryptocurrency taxpayer, you will convert your crypto gains or losses to Canadian Currency (CAD) before reporting taxes on them.

Experts assert that the more the Canadian crypto population grows, the more regulations the government will introduce to the market.





Author: Valentine. A, Gate.io Researcher
This article represents only the researcher's views and does not constitute any investment suggestions.
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