Regulating Bitcoin and cryptocurrency exchanges is becoming more contentious. It has been often suggested that Coinbase and other exchanges like it should register with the Securities and Exchange Commission (SEC) since they provide “dozens of tokens that may be securities.” “Sketchy conduct” is what Brian Armstrong, CEO of Coinbase, is accusing the SEC of, and he plans to publish his own recommendations on how authorities should govern crypto.
As far as Canada’s equivalent of the Securities and Exchange Commission is concerned, that question has already been determined. It has been verified by the Canadian Securities Administrators that crypto exchanges must register with a securities regulator in order to do business. In order to continue servicing Canadians, the exchanges are scrambling to comply.
It’s remarkable how quickly Canada’s counterpart of the Securities and Exchange Commission (SEC) has been able to clarify the situation of cryptocurrency legislation in the United States. Can Canada’s template for regulating bitcoin exchanges be adopted by governments looking for a long-term solution?
Crypto Regulation In Canada
Cryptocurrency is regulated in Canada as a kind of investment. As a result, the regulations that govern securities also apply to digital currency.
Financial assets that can be traded, such as ETFs, stocks, bonds, hedge fund investments, options, and futures, are referred to as securities.
What are “securities”? You know what they are, but how are they regulated? Not to worry, we’re going to cover precisely that subject matter in this article.
You should keep this in mind before you get into the technicalities of Bitcoin legislation. The Royal Canadian Mint Act and the Bank of Canada’s banknotes and coins are the only recognized forms of legal money in Canada.
This indicates that the government and a central authority do not support cryptocurrencies. Banking institutions like credit unions and financial institutions are not in charge of digital money since they don’t have control over it. However, as time passes, cryptocurrencies grow more popular in a variety of businesses, including gaming. The growing number of sports bettors in the nation is one illustration of this.
The number of individuals who use BTC betting sites is growing as the popularity of digital currencies, particularly Bitcoin grows throughout the world and in Canada. It’s also worth emphasizing that the Canadian government cannot seize control of sports bettors since blockchain technology enables them to remain anonymous.
Since its inception, Canada has been a trailblazer in the adoption and regulation of Bitcoin. Anti-money laundering (AML) regulations for crypto service providers were first passed by Canada. Initial efforts were based on regulations intended for money service firms but later expanded to include cryptocurrency.
Canada has been taxing cryptocurrency since 2013. (more on this later).
In terms of digital currency legislation, this was the first of its kind in the US. Any exchange that “directs services” to Canadians is subject to the legislation, not simply those located in Canada.
The first cryptocurrency-only investment fund was registered by the British Columbia Securities Commission in 2017.
Canada’s Securities Administration (SCA) made an official announcement in 2017 on how cryptocurrency was regulated under the country’s securities rules.
Although Canada has dabbled with blockchain technology, it’s also worth mentioning. DDRs (Digital Depository Receipts) was trialed by the Bank of Canada in 2016 and 2017. The DDRs were used in an attempt to represent Canadian money digitally.
Together with the Bank of Canada’s R3 and Payments Canada’s Project Jasper, these three organizations are working on a new digital payment system. It is presently in Phase 4, which also includes the Bank of England and the Monetary Authority of Singapore, and is in the final stages of implementation. A cross-currency and cross-border settlement mechanism has been in the works for the last two years.
Regulation of Coinbase
The Canadian Securities Administrators (CSA) have adopted a considerably more direct approach to bringing crypto exchanges within the purview of securities regulation. The Ontario Securities Commission, Canada’s largest securities regulator, is part of the CSA, which serves as a national umbrella body for provincial and territorial securities regulators (OSC).
The CSA has coined the phrase “crypto contract” to include all of Coinbase and Kraken’s transactions in order to bring them within the purview of securities legislation. Coinbase and Kraken are subject to Canadian securities laws since they issue crypto contracts, which are securities.
Everybody agrees that bitcoin is not a security, even Canadian authorities. Coinbase customers’ bitcoin in their Coinbase accounts, however, are not genuine bitcoin, according to the Central Securities Administration (CSA). If you want to use the technical term “crypto contract”, it’s a contractual right or claim based on bitcoin’s underlying blockchain technology. A Canadian securities regulator will require Coinbase and other exchanges that deal in crypto contracts to register as a business.
This is a striking departure from U.S. practice. According to law professor Ryan Clements, “no other foreign securities regulator has yet adopted the CSA’s allegation concerning crypto contracts.”
Coinbase is now included in the group of Canadian exchanges and dealers required to follow a set of universal market integrity rules, which encompass things like abusive trading, front running, priority for clients, and more. Customers might expect Coinbase to take appropriateness and suitability into account.
