Cryptocurrency is rapidly becoming more common in the Canadian economic arena. In addition to this broader acceptance, Canada has relatively succeeded in creating a stable regulatory environment. In 2014, Canada established itself as a leader in global digital assets when the Canadian parliament became the first government in the world to pass a national digital currency law. Since then, Canadian regulators have remained somewhat proactive in their approach to cryptocurrencies and have taken a cautious but optimistic stance, seeking to encourage innovation while protecting the interests of investors.
Regulatory support for digital asset innovation
Compared to other international jurisdictions that either adopt stricter policies or take a stricter stance, the favorable cryptocurrency environment in Canada is reflected in some of the options offered to startups that are testing digital asset technology.
For example, the Canadian Security Consortium (CSA) Sandbox initiative supports financial technology (fintech) companies that want to deliver innovative products by rigorously examining business models in real test environments. Likewise, the Ontario Securities Commission’s (OSC) LaunchPad works with financial services firms to align with digital innovation and encourage the development of Securities Act-compliant products, services and applications.
In addition to these services, aimed at innovators who want to work directly with financial authorities in the context of their specific business model, regulators have also published extensive but comprehensive guidance on navigating the current regulatory framework.
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Separation for regulation of digital property
The need for regulation has polarized the cryptocurrency industry since its inception. Investors and institutions are hungry for transactions that require regulation. On the other hand, an over-regulated economy could discourage Canadians from integrating into the broader digital asset industry and force them to invest abroad. So what’s a good balance between the two?
The early adopters of blockchain assumed that its unchanging qualities made it unregulated, and argued that cryptocurrency was created as a solution for strict public oversight of financial markets. Based on this assumption, many token issuers until mid-2017 largely ignored the registration requirements of the Securities Act, aimed at protecting investors and promoting fair markets.
However, strong remedies are necessary to protect individual rights and are an integral part of a functionally responsible jurisdiction. Regulation minimizes consumer exposure and is paramount to maintaining market integrity, especially in the financial sector, where people are highly at risk.
For example, it has now been established that Canadian cryptocurrency companies (such as cryptocurrency exchanges) must register with the Financial Transaction Analysis and Reporting Center of Canada (FINTRAC) as a financial services company (MSB). Registration means that these companies are subject to regulatory oversight and reporting requirements. As a result of these regulatory obligations, fraudsters are likely to be forced to leave space to make room for legal entities that can provide a higher level of investor protection. Legalization of the digital asset industry is the reason why trading platforms want gradual regulation; Work constructively with each other to increase safety and transparency without overwhelming an industry that is still in its infancy.
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Consequently, decision makers play an important role in creating the necessary conditions for creating an appropriate foundation for the safe functioning of cryptocurrencies. The CSA, along with the Investment Industry Regulatory Organization of Canada (IIROC), have expressed an interest in working closely with digital real estate firms to understand their point of view, address key innovation risks, and ensure that investor protection is not compromised. …
Regulation of this size cannot be hasty, and many factors have been taken into account by regulators to ensure that any new legislation only spurs the digital asset industry to flourish. Allowing Canada to function as a successful cryptolocation while protecting investment security and preventing fraud are some of the key elements of the proposed regulatory framework.