The traditional maturity of Canada's financial services sector has spurred Fintech innovation, especially in artificial intelligence (AI), digital payments, and robotic consulting.
Early fintech startups in Canada and the in-house laboratories of leading Canadian financial institutions, research support from leading Canadian universities, accelerated the pace of innovation.
The cryptocurrency sector in Canada, with a significant number of cryptocurrency miners attracted by the country's stable regulatory market and cheap energy, has grown rapidly.
Among future promising projects, it is necessary to highlight large investments in artificial intelligence-based fintech solutions, blockchain, reg-tech, and, in the insurance sector, in which Canada is a significant global player, insurtech.
Canadian financial institutions are leading in many cases, but Fintech startups are also a key part of the ecosystem.
Regulatory initiatives to date include:
- crowdfunding and regulatory initial projects (sandbox);
- launch panels and hackathon programs;
- training and clarification on securities;
- improvement of legislation in the field of cryptocurrency.
Significant incentives aimed at developing regional fintech innovation centers are also offered at both the federal and provincial levels.
Canadian Fintech regulatory issues
The Canadian Securities Administration recently offered guidance on the applicability of Canadian securities laws to:
- cryptocurrency exchanges;
- cryptocurrency offers, including ICOs and initial token offerings;
- cryptocurrency investment funds.
The guidance states that cryptocurrency offerings in which coins or tokens are offered in exchange for regular currency (or other forms of cryptocurrency) are in many cases similar to regular IPOs and will be regulated as securities offerings in Canada.
In making the necessary determination decision, the Canadian regulator will consider content, not form. He gives examples of coin sales that allow the customer to play a video game (probably not defined as a security) and, conversely, sales of coins whose value is related to future profits or business success (which are likely to be defined as security, given that the expectation of profit is the defining feature of security).
Crowdfunding in Canada
Securities regulators in Canadian provinces have adopted a prospectus exemption for crowdfunding. The exemption allows investors to invest certain limited amounts in early-stage companies through crowdfunding platforms in Canada. Both public and non-public companies are allowed to use the prospectus exception.
Securities must be distributed through a single financing portal, where the proposal document and some other materials must be posted. In order to be eligible for the exception, issuers must meet the Canadian residency requirements and can only distribute non-complex securities that investors can easily understand. This list includes common shares, non-convertible preferred shares, and certificates of limited partnerships.
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