Canada’s Current Crypto Regulations

Blockchain, News, Opinion, Regulation | June 2, 2022 By:

As the popularity of cryptocurrencies has grown over the last few years and several investors have added them to their portfolios globally, governments and regulators have taken a new refined approach. This is especially in Canada, where regulators have placed importance on increasing regulations in the space.  

Canada and its regulator Financial Transactions and Reports Analysis Center of Canada (FINTRAC), were one of the first countries to add crypto-related businesses to the list of companies classified as Money Service Business (MSB). As a country, Canada has been ahead of the curve in integrating crypto into financial regulations. 

FINTRAC introduced a new definition for such companies and named them Virtual Currency Dealers, and put forward registration requirements that came into effect in June 2020. With such registrations came responsibilities that required businesses to collect certain information and confirm the identity of the individuals using their services. In June 2021, additional reporting requirements came into effect that several companies struggled to accommodate.

NDAX has always been a leading business in compliance and has held its MSB registration with FINTRAC since 2018 and is currently in discussion with other regulators.

In January 2020, the Canadian Securities Administrators (CSA) put out “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” to propose a framework for the crypto-asset trading platform and was out for discussion by the industry. Shortly after, in March 2021, CSA also issued directives for the user of cryptocurrencies. In September 2021, CSA and Investment Industry Regulatory Organization of Canada (IIROC) published guidance intended to assist crypto-asset trading platforms with complying with current rules and regulations. CRA also introduced a classification of crypto assets and provided additional guidance on treating crypto assets for tax purposes. In addition, crypto-assets and their effects on the current financial system and potential issuance of a central bank-regulated digital currency (CBDC) were evaluated by the Bank of Canada.

This shows that Canadian regulations may not have a complete framework established but have been developing rapidly for the asset class and other regulators worldwide are not far behind. In the United States, several regulatory frameworks are also expanding with a contribution to many regulatory bodies, such as the Financial Crimes Enforcement Network (FinCEN), Bank Secrecy Act (BSA), the Security and Exchange Commission (SEC) and the Commodity Future Trading Commission (CFTC). In the U.S., the definition of “crypto-asset” differs widely depending on the regulator, and such discrepancy led to delays in developing a clear framework. With that being said, some states, such as New York, already have clear guidelines and progressive regulations in place that are specific to crypto assets.

Many other countries have either developed a new regulatory framework, tried fitting the newly developed asset class into an existing one, or simply banned them.

Currently, I do not believe a single financial regulator or country has not thought of crypto-assets and their impact on the current financial systems. Each country differs in defining and treating crypto assets, leading to how they are regulated. For example, the UK, Australia and Japan classify cryptocurrencies as legal property. In all three countries, trading platforms can freely operate as long as they obtain registration with a respective regulator responsible for Anti Money Laundering (AML) and Counter-Terrorist Financing (CTF).

All cryptocurrency trading platforms have already been regulated in Singapore by the Monetary Authority of Singapore (MAS), but recently introduced laws provided more authority and power to the regulators, which tightened the space and forced several businesses out of the industry and the region.

Like in several countries, in South Korea, virtual asset service providers must adhere to AML/CFT rules and obtain registration. South Korea was one of a few countries that did not provide a clear definition for the crypto asset but have introduced a very clear guideline around its taxation.

In June 2021, El Salvador became the first country to legalize crypto and declare bitcoin as a legal tender in the country and formally adopted it as a form of settlement against debts shortly after the Central Africa Republic (CAR) legalized Bitcoin other crypto assets. Some of the other countries, such as  France, Mexico, Spain, and Denmark, have followed the lead and developed a framework and now are accepting Bitcoin for use in certain transactions.

While several regulators are looking at building appropriate regulations that will protect investors’ interest and allow new and innovative businesses to thrive, several countries do not allow for the use or trade of crypto assets, and a number of them have issued a crypto ban or have identified Bitcoin as illegal.

The Canadian regulatory landscape is not fully developed, but the regulators are working on several initiatives. Notably, the regulators are responsive to the voices in the industry while keeping the protection of investors as their number one priority.

The Future Impact on the Canadian Economy if Cryptocurrency Becomes Legal Tender

Many wonder what the adoption of cryptocurrency would look like for the Canadian economy, a great example would be to compare this to El Salvador, where bitcoin was adopted as legal tender and businesses there are now obligated to accept bitcoin for customers to pay for products and services. 

Everyone can pay with bitcoin for groceries, purchasing a house or a car, paying for a haircut and anything else that they are buying and also pay their taxes with it. This is obviously a very simplistic way of looking at it, which El Salvador utilized to resolve a number of issues that they have experienced in their traditional financial system. 

In Canada, we have an established financial system, and with that, very different factors and aspects will have to be considered when we are talking about accepting crypto as a legal tender. Crypto assets are very volatile, so if crypto is used in covering day-to-day expenses, the volatility of crypto assets may lead to an inability of individuals to budget well and also for the government to develop effective fiscal policies. Because of such fluctuation, not all the crypto assets would be suitable for utilization as a legal tender.

Bringing crypto-assets as a legal tender would need to be a gradual process that would allow consumers to get familiar with its usability and enable businesses to adopt innovative technology to accept crypto as payment for goods and services. 

Crypto assets are widely used for cross-border transactions, which allows for simplicity and speed of transactions at a reduced cost, and that is one of the current utilities of the crypto assets as of right now. In some instances, you may even be able to pay for goods and services where the crypto asset is accepted as such. The majority of the first crypto adopters utilize crypto for speculative trading, and this is expected until one or more crypto assets are recognized as a legal tender and widely accepted. 


Julia Baranovskaya, CFE is the Chief Compliance Officer and a co-founding team member of the National Digital Asset Exchange (NDAX). Her mission is to work closely with regulators to bring appropriate regulations to the virtual currency industry, prevent the use of cryptocurrencies in money laundering, and combat fraud. The combination of working for numerous IIROC-registered firms, her legal and compliance background, sparked by her entrepreneurial spirit, drew Julia to blockchain and the digital asset class.