Modern technology, and more specifically DLT, could potentially render provision of financial services more efficient. The Canadian government's position (including that of the country’s regulatory bodies) on cryptocurrencies is that there should be a balanced approach toward regulation of the cryptocurrencies sector.
So, let’s take a closer look at cryptocurrency regulation in Canada & the legal aspects of registering a cryptocurrency company in Canada.
Cryptocurrencies aren’t considered legal tender in Canada. Under Canadian legislation, only coins issued by the Canadian Mint can be deemed legal tender, and that is precisely why the Bank of Canada avoids using the term “virtual currency”.
Cryptocurrency Regulation in the Dominion of Canada
Cryptocurrencies in Canada are mainly governed by securities legislation which outlines powers of regulatory authorities. Laws on securities aren’t passed by the federal legislative bodies - the responsibility for this lies with the provincial legislative bodies. Regulations pertaining to entering Canada’s securities market, including all of its provinces, are largely uniform.
Being a non-governmental organization, CSA represents all Canadian securities regulators, both central & provincial ones. Some of Canada’s regulatory bodies are authorized to issue notices & statements on potential application of the securities legislation to ICOs.
In its guidance on the applicability of ICO legislation in the Dominion of Canada, CSA notified of its awareness that enterprises sell their tokens & sales as softwares. Its position is that securities legislation isn’t applicable to the selling of cryptocurrencies/tokens in the Dominion of Canada; however, when it comes to ICOs, coins/tokens must be deemed securities since they represent investment contracts.
Registering a Cryptoasset Company in Canada
Trading in cryptocurrencies in the Dominion of Canada is qualified as operations with securities. Before individuals or legal entities are able to legally enter the securities market in the Dominion of Canada, they must provide the so-called ‘prospectus’. This is a comprehensive disclosure document meant to ensure protection of public securities by disclosing information about the securities & issuer to potential investors.
Apart from issuing a prospectus, an individual or legal entity engaged in the distribution of securities must register with Canadian regulatory authorities.
Registering an ICO company in Canada
The current trend in regulation of the Canadian market of virtual currencies les in the application & adaptation of existing legislation to transactions involving blockchain technology which resemble traditional securities. Even if it is hard to say whether an ICO falls within the specific definition of a security, it may somehow be associated with the sale of securities.
Registering a cryptocurrency company in Canada requires compliance with AML/CFT rules. All major cash operations exceeding ten thousand dollars must be reported to FINTRAC. Receipt of two or more cash installments in the amount of more than ten thousand dollars, particularly if the transaction involves the same individual or legal entity & was conducted within twenty four hours, must also be reported.
There are currently no laws or regulatory bodies in Canada capable of determining whether ICOs or other cryptocurrency transactions fall under the definition of securities operations. And even though CSA guidelines contain recommendations which can increase the likelihood that tokens/coins are recognized as securities, each ICO should be analyzed by taking into account specific circumstances.
If you need more information on the regulation of the cryptocurrency market in Canada or looking for legal advice on launching a cryptocurrency company in Canada, do not hesitate to contact us. IQ Decision UK has the expertise & knowledge to provide you with an exhaustive consultation on all matters pertaining to the sale of cryptocurrencies in Canada.