The digital currency industry is no stranger to rapid developments, and in the constantly evolving landscape a lot can change in just a short period of time. Few know this better than those observing the current regulatory developments in Canada, as the country recently announced significant changes for digital currency businesses. The country previously vowed to innact innovative digital currency regulation through a promise by the OSC. Further, Canadian regulators collaborated with international regulatory bodies to crack down on illegitimate projects. Now, Canadian regulators are attempting to usher in a new phase of the country’s burgeoning digital currency industry.
Canada’s previous approach to the digital currency industry was often unclear. For the most part, many theorized that Canada shared the caution of other global leaders and was hesitant on enacting regulation that could stifle the growing digital currency industry.
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This theory was shared by Addison Cameron-Huff, a former private-practice lawyer and current president of Toronto-based blockchain startup Decentral. In an interview with Coinsquare News, Cameron-Huff spoke on how most of the country’s regulators want Canada to stay globally competitive. Further, he added that there are many blockchain allies within the government, despite the stigma surrounding regulation. This certainly appeared to be the case months earlier in April 2018, when the Ontario Securities Commission (OSC), one of the country’s largest regulators, announced its intent to create innovative digital currency regulation. According to the OSC, these regulations would look to foster the growth of the blockchain and digital currency industry while also serving to protect investors from arising issues with fraud and illicit spending.
OperationCryptosweep launched at the beginning of May 2018. Many stories continue to surround the actions of the largest-of-its-kind collaboration between U.S. and Canada regulators, as it attempts to address rule-breaking digital currency projects. The joint effort brings together North American Securities Administrators Association (NASAA) members from more than 40 jurisdictions throughout North America.In just its first month, the initiative reportedly resulted in nearly 70 inquiries and investigations, with 35 pending or completed legal actions being taken. Among its members are several Canadian regulatory bodies, such as the OSC. Around the time of the Operation Cryptosweep announcement, the OSC issued an investor warning against several digital currency firms. Additionally, the OSC stated that its contribution to the initiative reflects “ongoing efforts to raise awareness about potentially fraudulent activity involving cryptocurrency products.” With digital currency regulation continuing to evolve in Canada, the country’s international attempts to address problematic digital currency projects and firms could have a lasting impact on the at-times chaotic industry.
Both in Canada and abroad, debates about if digital currencies and tokens should be considered as securities remains a prevalent part of the regulatory discussion. This week, however, the Canadian Securities Administrators (CSA) offered further guidance on how securities laws should be applied to digital currency and token offerings. Staff Notice 46-308 Securities Law Implications for Offerings of Tokens marks a significant clarification on the part of Canadian regulators, as it furthers previous guidelines on how securities laws apply to Initial Coin Offerings (ICOs). The publication provides guidance for CSA staff and will undoubtedly serve as a significant reference for Canadian digital currency businesses, as well as investors assessing the compliance of their potential investments.The update also addresses ‘multiple-step ICOs,’ stating that they can not be used to circumvent securities laws. The CSA clarified that a “token delivered at a second or later step is a security, despite the fact that the token may have some utility,” since it has the features of a security when delivered.
Alongside the other facets of the country’s significantly updated approach to the industry, the Canadian government also announced a change to the way in which businesses dealing in virtual currencies will be regulated. Designed to strengthen the country’s Anti-Money Laundering (AML) and Anti-Terrorist Funding practices, as well as clarify and update existing requirements for businesses, these changes could mark a new era for the industry. According to proposed amendments published by the Government of Canada, businesses dealing in virtual currency will be regulated as Money Services Businesses (MSBs). MSBs are institutions other than chartered banks that handle money services, such as money transfer services or foreign exchange services. MSBs are required to comply with FINTRAC (Financial Transactions and Reports Analysis Centre of Canada) obligations, and must remain compliant with Know your client (KYC) and AML reporting procedures. Overall, the move marks a sizeable step towards integrating digital currency businesses with widely-accepted businesses and institutions.
Achieving digital currency regulation that is able to satisfy industry proponents, businesses, and government officials is no small task. However, with the abundance of recent developments to Canada’s digital currency approach, the country is positioned to once against cement itself as a global trailblazer. If handled correctly, these regulations could serve to grow and further legitimize the digital currency industry in a way that continues to prove challenging for many other countries.
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