Since the FinTech sector is getting more popular, many people are curious to what extent cryptocoins and related products are legal and usable. The brief answer is yes, buying and selling them is legal, however, Canada does not consider them legal tender. As this status often leads to misunderstandings, let’s take a look at the regulation of cryptocurrency in Canada.
Overview of the Crypto Market in Canada
Recently the world’s first directly backed Bitcoin Exchange Traded Fund (ETF) got its approval in Canada, showing up a shift in regulations, and bettering access to virtual currencies for all investors. Cryptocoins have been gaining strong popularity among investors, and the establishment of the first ETF created a path for related products in Canada. In fact, several days later, other BTC ETF, known as EBIT launched its operation on the TSX, and as of April 2021, Canada issued an authorization for the world’s first Ether ETFs for retail investors.
As we could see, the Canadian crypto market is growing at a fast pace and requires appropriate regulation to make the operation of the market secure and transparent for all parties.
Given all that buzz around virtual currency, you may possibly have the following question: “Is cryptocurrency legal in Canada?”.
In general, the Canadian authorities allow crypto trading in Canada, meaning that online and physical stores can accept cryptocoins if they choose to. Thus a plethora of institutes is open to alternative payment methods to facilitate the shopping experience and ensure safe and secure transactions between buyers and sellers. However, acceptance of Bitcoin for payments currently is possible in only in brick-and-mortar or virtual stores, the use of crypto to pay your taxes is not allowed by the applicable legislation.
Status of cryptocurrencies in Canada
While virtual currency is allowed to use in Canada, it is not legal tender, as defined in the Bank of Canada Act. That’s because the Canadian authority only recognizes the CAD as the official currency of the country; legal tender is defined as notes issued by the Canadian Bank and coins from the Royal Canadian Mint Act. Thus, from taxation considerations, the cryptocoin is defined as a commodity, rather than “currency”. Under law perspective, token is recognized as securities unit and it falls under the respective rules towards tradable assets. From an AML point, crypto organizations are treated as MSB, for which strict AML obligations are imposed.
Although the legislative domain is now playing catch-up, given the recent activities in the crypto domain, there has been a new concentration on administering virtual currencies across all pillars.
Canadian regulation for cryptocurrencies
As of now, Canada sets a legal framework for cryptocoins by imposing securities laws, enacted on a provincial and territorial basis. Securities Administrators (CSA) that coordinate all securities regulators in place ensure all applicable rules are properly executed. While the CSA coordinates innovations and proposals across Canada, local regulators deal with all complaints in terms of any law infringements in their respective jurisdictions, creating more effective service since each regulator is closer to its local investors and market participants.
Regulatory Updates for Crypto companies
In 2020, the CSA published Notice 21-327 bringing clarity to the regulation of crypto assets. In line with it, organizations carrying out payments related to cryptoassets, including trading cryptocoins are subject to securities law if these assets are:
- securities or derivatives based on crypto assets;
- commodities.
The bottom line
Even though Canada’s regulations on crypto market aim to centralize decentralized technology and may ward off potential users, the government has acknowledged the prospective benefits and made steps to incorporate the technologies in Canada. It may be time-taking for the government to strike a balance between fear and innovations, however, in the meantime, participants of the crypto market should be well versed in the taxation laws and regulations to protect themselves until the authority’s apprehensions subdue.
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