Canada has remained one of the most cryptocurrency-friendly countries for many years. This is the first country that has approved and adopted anti-money laundering rules for crypto service providers.
Cryptocurrency is not legal tender in Canada. However, you can use crypto tokens to make purchases or exchange them for goods and services at stores that accept them in Canada. This was contained in directives issued by Canadian securities administrators.
In 2013, Canada introduced the first cryptocurrency tax and began deducting tax on crypto income 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) Act and the Terrorism Financing Act.
The inclusion of cryptocurrencies in this law made it the first national law directly applicable to digital currencies. The Financial Crimes and Terrorism Act does not apply to Canadian crypto activities, but includes all crypto exchanges that provide their services to Canadians.
In 2017, the British Columbia Securities Commission registered the first investment using crypto tokens only. In the same year, the Canadian Securities Authority (SCA) announced that the then existing security laws would now apply to cryptocurrencies.
As of June 2020, all cryptocurrency exchanges and payment systems are legally recognized as money service enterprises (MSBs) in Canada. According to Triple A, about 1.2 million Canadians own cryptocurrency, which is 3.2% of the total population of Canada.
Canada is considered a cryptocurrency-friendly country, and all rules and laws are easy to follow. Therefore, at this stage it is appropriate to determine the various rules of cryptocurrencies in Canada.
Regulation of Cryptocurrencies in Canada
As we mentioned earlier, cryptocurrency exchanges are legally recognized as Enterprises providing monetary services; therefore, all rules applicable to enterprises providing monetary services apply to cryptocurrency exchanges. That is, they require due diligence, reporting, verification and record keeping.
The first regulation is FinTRAC registration
From June 2021, all cryptocurrency exchanges in Canada must be properly registered with the Canadian Financial Transaction Analysis and Reporting Center (FinTRAC). The cryptocurrency platform must meet all applicable market valuation and margin requirements.
This rule was announced in June 2020, and all cryptocurrency platforms had the privilege for a whole year to pass it.
The second regulation is the Rule on transfers in virtual currency
In February 2020, the Canadian government’s Rule on Virtual Currency transfers came into force. This rule applies to all enterprises engaged in monetary services, financial institutions and cryptocurrency providers. These organizations must register cross-border transactions with cryptocurrencies and all cross-border electronic transfers of funds. The law gives the Canadian government the right to request this transaction data at any time.
The virtual currency transfer rule implies that all cross-border crypto transactions and transactions must comply with the same due diligence and other requirements of the Proceeds of Crime and Terrorist Financing Act of 2014.
The law, in fact, is aimed at preventing and countering money laundering using cryptocurrencies. It regulates and provides for measures for international currency transactions involving Canadians and Canadian institutions.
The third regulation is the rules of ICO cryptocurrencies in Canada
The notice 46-307 of the Canadian Securities Administrators (CSA) on cryptocurrency offerings also sets out the rules for the initial placement of coins or tokens. It emphasizes whether the Initial Coin Offering (ICO) is considered a security or a software product.
The Regulation allows Canadian Securities Administrators (CSA) to decide whether an Initial Coin Offering (ICO) includes securities based on a case-by-case analysis. Until now, the CSA has treated most ICOs as securities, with some exceptions.
Finally, the rules for crypto mining.
Cryptocurrency mining is a legal enterprise in Canada, and the Canadian government has no sanctions or restrictions against cryptocurrency mining.
Nevertheless, in Quebec, Hydro-Quebec has reduced the energy consumption of cryptocurrency miners to 300 megawatts. Quebec is an energy supplier in Canada, and they are aware of the large amount of energy that mining consumes, so in order to prevent power outages, Quebec limits energy consumption by miners.