Category Archives: FinTech and Alternative Finance

Infographic – How to explain Bitcoin to your Grandparents

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NCFA Guest post | May 18, 2018

How to Explain Bitcoin to your Grandparents #infographic

You can also find more infographics at Visualistan


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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The forces of change are trumping banks and regulators

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The Globe and Mail | and | May 15, 2018

Patricia Meredith and James L. Darroch are the authors of Stumbling Giants: Transforming Canada’s Banks for the Information Age, the winner of the 2017/18 Donner Prize.

Most businesses fail to respond to the challenge of disruptive technology. But disruptive technologies, including mobile devices, cloud computing, artificial intelligence, blockchain and social networking, are transforming financial services.

So it is perhaps not surprising that, far from embracing creative destruction, the protected oligopoly of Canadian banks and their counterparts in many other parts of the world have chosen to lobby in favour of the status quo. The response of global financial regulators, in the form of Basel II and III, has reinforced the old business model, making it more difficult for banks to adapt. Unfortunately, as we describe in our book, Stumbling Giants: Transforming Canada’s Banks for the Information Age, the forces of change are far more powerful than the bankers and regulators are.

As Bill Gates said more than 20 years ago: “We will always need banking, we won’t always need banks.”

The functions of banking – lending, investing and paying – are necessary in the information age. But how these functions are performed looks very different. Financial-technology companies (fintechs) – such as Amazon, PayPal, Alibaba, Apple, Google and myriad small players including robo-advisers, lenders and payments providers – are using technology to create new and better financial services for both consumers and businesses. They operate in all parts of financial management, whether that is tracking overall spending, applying for a loan or optimizing investment strategies. These technology companies compete directly with traditional banks and, in many respects, have taken them by surprise.

Ant Financial Services (part of the Alibaba Group) uses information from its payment-processing platform to develop cash flow forecasts and assess the riskiness of micro, small and medium-sized businesses. It tracks performance in real time and increases credit lines if the business is increasing faster than expected and accelerates collections if it is not. Ant’s loan losses are significantly lower than those of traditional banks. It’s “Just Spend” securitized consumer loan product helps consumers take that vacation they have been dreaming about. Amazon One Click let’s me buy that item I have been eyeing up online without having to perform a payment transaction. PayPal for Business offers web payments, online invoicing and other services to help me run my online business better.

To support the growth of fintech companies in Canada, the federal government must encourage innovation and increase competition. As Payments Canada rolls out our new real-time payments system, the government should accept the Competition Bureau’s recommendation and enact legislation to open access to qualified non-bank participants. It must implement legislation similar to laws already in place in Britain, the European Union and Australia, making it clear who owns the data stored in warehouses (the customer) and who has access to it (all competitors with the owners’ permission). This would make information – the raw materials for modern financial services – available to all competitors.

Check out:  NCFA: Canada Needs a Harmonized Securities Environment as Current Provincial Approach is a Fintech Innovation Killer

To support the growth of micro, small and medium-sized enterprises (SMEs) the government should consider giving the Business Development Bank of Canada the mandate to develop securitized lending. Using artificial intelligence and sophisticated risk-pricing algorithms to adjudicate loans based on real-time transaction data and future cash flow forecasting has proven much more reliable than traditional bank lending, based on historical returns and secured assets.

Innovation in financial services is urgent. Canada is falling further and further behind. Countries such as China, India and the United States are moving rapidly to establish e-commerce platforms with integrated financial technology companies. Fintechs are key drivers of the financial ecosystem of the future. Instead of wasting time revising the Bank Act to preserve the status quo, our policy makers should focus on legislation to ensure access to infrastructure and data for innovative new entrants and access to financing for the SMEs that represent Canada’s entry into the 21st century information economy.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

 

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What’s the Difference Between a Regulated ICO and an STO?

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The Merkle | | May 14, 2018

ake a deep breath before you read this. Maybe go get a coffee. We’re going to talk about everybody’s favorite topic – regulation. Regulation is something that splits the crypto world down the middle. It sends many people into a blind fury over quashing innovation, or a heated discourse about the wealthy trying to seize back the power.

Then you have others who believe that regulation – to protect investors – is probably a good thing. But here’s the kicker about regulation. It varies by jurisdiction. There’s a reason Binance moved to Malta, after all.

So, until the world joins hands and comes up with a global solution to the problem, what you read here applies to blockchain companies registered in the United States.

Why Regulation is Needed

Even if the weekly scams, hackings, and general bad behavior don’t stop you from investing in ICOs, you’ll probably grudgingly admit that things are a little out of control.

“There’s a small number of con artists and scammers ruining it for everyone else. No company ever can guarantee 100 percent return on investment. That’s a red flag; that’s the very definition of a scam,” says Darren Marble, CEO of CrowdfundX.

CrowdfundX is a fintech marketing firm that has spent the past three years marketing regulation A+ IPOs to the New York Stock Exchange and the Nasdaq.

And since he so kindly brought the STO acronym to our attention for the first time, it’s only fitting to let him explain it in greater detail in his own words.

What do you say to people who think that regulation will quash innovation?

People read my comments and they think I’m a naysayer and that I don’t believe in crypto, but it’s quite the opposite. We’re partnering with some of the most innovative companies out there because I believe this is the future.

See:  Your guide to cryptocurrency regulations around the world and where they are headed

Can you give us a little background on CrowdfundX and what you do?

We were formed out of a need to help issuers market deals that arose out of the JOBS Act of 2012. That included some securities exemptions and critical changes to Regulation D 506(c) that allow issuers to generally issue or market their deal[s], but restricts them to verified accredited investors.

The JOBS Act was signed in 2012 to make some much-needed changes to security laws that were 80 years old in some cases. But it wasn’t just Regulation D that changed.

The other big exemption was Regulation A+, which allows a private company to raise up to $50 million, generally solicit or market their deal, and raise money from anyone over the age of 18.

So investors anywhere without a high net worth could invest in projects?

Yes, as long as they were over 18.

(That cuts out a sizable chunk of the crypto community).

CrowdfundX and KodakCoin

Can you tell us about KodakCoin and what you do for them?

For the last three years, we’ve marketed 50 percent of all the Reg A+ IPOs in the United States, making us a good candidate for marketing an STO. In January, we signed our first STO client, KodakCoin.

We were approached in 2017 by ICO issuers that wanted help marketing their ICOs. I’ve never felt comfortable with it because I had my own questions and doubts about security laws, whether or not these deals were legal, or if they would be investigated or prosecuted. It turns out my hunch was right.

I think that we’re getting into the market at the right time. A time when ICOs are being investigated and the clamor for regulation is getting louder. And that’s how we landed Kodak. They went out and said, “We’re going to run a compliant ICO.”

See:  Crypto Self-Governance Touted as Solution to Regulatory ‘Mess’

What’s the difference between a regulated ICO and an STO then?

I would say an STO is a better term. ICOs have gotten a bad name. I would encourage any issuer in the US not to use the [term] ICO at all. I think ICO is a dirty word, a tainted word; it has negative connotations and is synonymous with scams. Six months ago, a “compliant ICO” sounded right, but now we need a new term moving away from ICO, which people associate with scams.

So, it’s all in a name? An STO is basically a regulated ICO, rebranded?

An STO is a regulated offering that uses either Reg A +, Reg D 506(c), Reg CF, or registered. So it’s not an STO or Reg A+; it’s an STO using Reg A+ or an STO using Reg D. So, there’s some confusion there… An STO is simply a regulated token offering that registers with the SEC or uses an available securities exemption like Reg A+ to do it.

If you’ve been following the news, you’ll know that KodakCoin finally announced [that] their ICO will take place later this month, after some contentious delays. While you won’t actually hear the term STO mentioned, the delays were due to Kodak seeking a regulated token offering.

They said they wanted to be compliant and they started speaking to the SEC, who wanted to see paperwork; they wanted to know about stuff and started a dialogue. They wanted to see the contract between CrowdfundX and KodakCoin. They slowed down the deal to prioritize investor protection, compliance, and transparency. Unfortunately, that was perceived by some in the media as a red flag, because they were going to launch at the end of January and then had to delay.

If you want to get the blessing of the SEC, it takes time. Regulation takes time.

The bleeding-edge pioneers are paying the price. At some time in the future, these deals will get turned out quickly and there will be precedents and benchmarks. We saw the same thing happen June 2015 when Reg A + went into effect. Companies could legally do a Reg A filing, but no one had ever done it and no one knew how to do it!

How do STOs or regulated ICOs work?

When I say STO, there are people all over the world reading The Merkle and people have different reactions because they’re based in Malta, Singapore, or Australia. But when I’m talking about STOs, I’m specifically referring to a US-based blockchain company that desires to raise a regulated token offering.

See:  The Cryptocurrency Industry Might Actually Benefit From an Ad Ban

The issuer has a few different paths they can follow. They can register with the SEC and do a full-on IPO, which hasn’t happened yet but will happen at some point, or they can use one of several securities exemptions, Reg D 506(c), Reg A+, or Reg CF.

Here’s the Breakdown

Reg D 506(c) is fast, easy and efficient. There is no cap on the raise; you file a form D. But you’re limited to raising money for verified accredited investors.

[With] Reg A+, you can raise up to $50 million, you can solicit or market the deal, anyone over 18 globally can invest. But it’s costly and time-consuming because you have to file with the SEC and have two years of audited financials.

Reg CF is short for Regulation Crowdfunding. You can raise up to $1.07 million over a 12 month period and generally solicit or market the deal. Anyone over 18 can invest and it’s the fastest and cheapest method available. But you’re limited on the amount you can raise.

So those are four paths an STO issuer has. Register, Reg D 506(c), Reg A+, or Reg CF.

What does the difference look like to an investor?

With an ICO, you click through to a landing page and then you can basically send ether to a public wallet, and once your ether is received you get tokens from some deal. That’s pretty seamless.

But in a regulated offering, you have to go through a process of KYC and AML, and that’s to prevent bad actors from investing in a deal. There are more steps that the investor has to go through, and it’s more complicated than sending ether to a public wallet in an ICO.

Regulated ICOs or STOs are more of a mind-bender (and expense) for the company as well. But they have the obvious advantage of complying with the SEC.

(And a few other perks besides.)

Check out:  Don Tapscott urges ‘sensible’ cryptocurrency regulations

So, being regulated allows a company to get past issues like the ad ban? Can they advertise on Facebook, for example?

Any regulated offering allows the issuer to advertise legally, [on] social media and key sites where ICOs are currently not able. The ban has forced issuers to be more creative in terms of how they market and advertise their deals.

You couldn’t market an IPO five years ago the way we’re doing today; you would go to jail. It’s very new. But the very basics are quite simple… don’t lie, cheat, or steal… so if you start there, you’re probably going to be on the right side of the law.

Then from there, there’s a number of nuances, so, in a regulated offering, let’s use a Reg A+, for example. If I’m advertising online, let’s say I’m doing a post on Facebook, the ad has to have a clickable hyperlink to the issuer’s offering circular that has a number of important disclosures that an investor can optionally read and peruse.

Obviously, not all investors will take the time to read a 200-page document… but at a minimum, they’re there to protect investors, they are there to tell them what the risks of getting involved with any type of deal are…

About the ad ban, I don’t think real teams should be concerned. The fact that you can’t advertise on Twitter should not deter you. The rush of investors was last year. Now there are crypto hedge funds – the best deals are being funded by small groups of passionate crypto hedge funds.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 7500+ members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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Crypto Self-Governance Touted as Solution to Regulatory ‘Mess’

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Coindesk | Wolfie Zhao | May 14, 2018

The question of whether self-regulation will help solve some of the cryptocurrency industry's problems was on full display Monday during CoinDesk's Consensus 2018 conference.

Part of the problem, according to panelist Gary DeWaal, a legal expert who focuses on financial services, is that existing rules as they relate to the tech are "an absolute mess." And this situation, he contended, isn't going away anytime soon.

DeWaal remarked:

"The CFTC budget has got cut this year. Even if it wants to regulate cryptocurrencies, it may not have enough resources from Congress to do so."

DeWaal was seemingly commenting on an opening remark made in an earlier talk by Brian Quintenz, a commissioner from the U.S. Commodity and Futures Trading Commission (CFTC). During remarks on Monday, Quintenz said that any decision on whether ethereum's ether should be regulated as a currency - a hot topic in recent weeks - "needs to be made carefully and coordinated."

"The last thing we want to see is regulators take different views," Quintenz said.

In this context, DeWaal said that self-regulatory organizations (SROs) can play a role in helping regulators test the waters ahead of clearer regulatory frameworks.

"One critical role of SROs ... is in elevating the reputation of regulation, as it will set a standard that will hopefully be adopted by regulators in the future," he said.

Echoing that point, Yuzo Kano, the chief executive officer of the Japanese exchange bitFlyer, said that efforts taken by Japanese cryptocurrency SROs had ultimately paved the way to the formal roll-out of a financial registration law launched by the country's Financial Services Agency (FSA) in 2017.

Check out:  Crypto Industry Should Self Regulate, Says CFTC Commissioner

"We initiated an SRO back in 2014 ... to impose the know-your-customer (KYC) rule for exchanges. Some operators did want to take part, but some didn't. What we did was to convince these operators to include KYC all together to protect the market," Kano said.

Indeed, following a notable hack in January that saw some $530 million-worth of NEM tokens from the Japanese exchange Coincheck, crypto trading platforms in the country have again formed an SRO that works closely with the FSA to help bring about the secure and stable growth of the market.

On the other hand, regulators in other countries are moving more quickly in developing their cryptocurrency and blockchain rules.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 7500+ members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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Slowly but surely, women are changing fintech

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Bloomberg Professional Services | May 3, 2018

Growing gender diversity, and more open conversations surrounding it, are having an impact on financial technology that’s as fundamental as it is subtle: As more women take on fintech roles at almost every level, their influence is driving user-centric product design and rapid development timelines.

That dynamic was evident during a recent Women in FinTech panel discussion hosted by Bloomberg. While the panelists covered a variety of topics—from the speed of fintech’s advancement to managing expectations when implementing financial cybersecurity solutions—they also noted how women’s voices have begun nudging products to be more reflective of users and how they work.

See: 

“When you have systems that are very skewed and homogeneous, your ability to build holistic solutions is somewhat limited,” observed Cristina Dolan, co-founder and chief operating officer of iXledger, a London-based peer-to-peer marketplace for insurance. As an example, she pointed to the development of speech-recognition products that struggle to accurately identify nuances present in women’s voices. Despite the sophisticated artificial intelligence behind them, she noted, the products were developed by men.

Relying on homogenous teams, “is not a really good way to solve problems,” agreed Ingrid Busson-Hall, senior director of financial regulation at PayPal in San Jose, California. “If you have people who all look the same and think the same, you’re going to define the problem one way and then you’re going to solve it in a really confined way.”

Reality catching up with research

Research bears this out. A recent study by Bloomberg, which analyzed some 600 decisions made by 200 different teams in a variety of businesses, found a direct link between inclusive decision-making and improved business performance. For example:

  • The business decisions of inclusive teams showed better results up to 87 percent of the time.
  • Teams that followed an inclusive process made decisions twice as quickly, and with half as many meetings, as those following non-inclusive processes.
  • Decisions made and executed by diverse teams delivered 60-percent better results.

Those are encouraging signs, but Busson-Hall emphasized that diversity goes beyond just looking diverse.

“If you think about the culture of the organizations that you’re in, are they organizations that really value diversity of thought and expression in its truest sense?” she asked.

For example, there may be a woman or a person of color on the team, but “if they never get to say anything, or when they say something their idea is appropriated pretty much immediately and incorporated into the broader whole, it isn’t real.” In other words, it’s important for teams to value the input of all team members if the organization is going to reap the benefits of diversity.

And in order for diversity of thought to flourish, added Busson-Hall, managers will have to tolerate a certain amount of conflict. “I think you have to accept that diversity means people disagree, people will dissent and you have to actually value that.” It’s those very disagreements that lead teams to define problems differently and come up with better solutions.

The power of mutual support

The sheer amount of technical detail covered by the discussion demonstrated the contributions women are making to fintech. If anyone needs to explore the cybersecurity risks inherent in payment transfer systems or why blockchain may impact fintech as much as the Internet did, these are the people to consult. Despite that, the panelists agreed much work remains to be done before women can deliver their full potential to financial technology.

“I think we need to be realistic and recognize that we have a long row to hoe and it’s incumbent upon each of us to make sure that we’re promoting and encouraging one another,” Busson-Hall emphasized. Jo Ryan, Bloomberg’s global head of product oversight, took it a step further:

“It’s not just about women helping women.”At the end of the day, “you’re part of a team and everybody who’s around you and learns from you benefits from your experience,” Ryan contended. “Women should engage with everybody and turn diversity into a conversation about people in fintech, not only women in fintech.

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 7500+ members and subscribers and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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Bank of Canada, TMX say blockchain feasible for securities settlement

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Reuters | Staff | May 11, 2018

TORONTO (Reuters) - Canada’s central bank, Toronto Stock Exchange operator TMX Group (X.TO), and non-profit organization Payments Canada said on Friday that tests had shown blockchain technology can be used for automating instantaneous securities settlements.

The three organizations said that they had developed an integrated securities and payment settlement platform using a distributed ledger, the same technology that underpins cryptocurrencies like bitcoin, and found that cash and assets can be tokenized to complete an instant settlement.

“This shows that it is possible to deliver payments in a way that has never been done before – by directly swapping cash from buyers to sellers, resulting in instant settlements,” said Gerry Gaetz, president and CEO of Payments Canada, the body which ensures financial transactions in Canada are carried out securely.

See:  Singapore consortium claims breakthrough in DLT payments project

However, Bank of Canada Senior Special Director Scott Hendry told a payments conference in Toronto on Thursday it was not yet clear if the use of blockchain technologies to settle securities transactions would lead to cost savings.

“We’re still uncertain after doing this work that there are significant savings possible for participants,” he said. “It’s not clear that all the participant dealers and banks are going to get a significant benefit out of this settlement system.”

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The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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What we can learn from Ontario’s $3 million loan to small business

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NCFA Canada | By Gary Buisansky | May 11, 2018

Summary

It's not every day we wake up to hear that the Ontario Government has committed to a loan of 3 million Dollars for small business. A market woefully underserved by traditional lenders.

Beyond the benefit this will have for small business, it provides testimony to the National Crowdfunding & Fintech Association of Canada’s continued advocacy for financial and regulatory support to the sector. (You can read the NCFA’s March 2018 submission to Finance Canada here and Lifting the Veil on Peer to peer Lending in Q1 2016 here).

As an industry, while we navigate the regulatory hurdles, there are some lessons we can take away from this, to better help ourselves and the Canadian market. There are also several Canadian success stories which we should not lose sight of. AI, Crypto currency and blockchain, are all thriving in Canada.

Ontario Government supports small business

Lending Loop, an active member of the NCFA, has been making the news lately with an announced 2-year pilot project partnership with the Ontario Government for a $3 million loan.

If you're not familiar with Lending Loop, it fills an important void in the market, connecting small businesses and Canadian retail investors, willing to lend to them.

Through the Lending Loop platform, small companies can finance loans at reasonable rates, often within days of their loan application.

These borrowers face very real challenges securing funding in the Canadian market with debt finance to SME's considered very risky. Where loans are made, they usually come with eyewatering interest rates, reflecting their often-limited track record, lack of financial information and availability of collateral.

See:  Ontario government invests in fintech to boost small-business lending

Loans provided by Lending Loop will now have a 10% government participation, with the government portion of the loan amount treated like any other; the principle amount will be repaid together with interest.

The anchor investment by the Ontario Government will enable total funding of around $30 million to Ontario's SME's providing welcome relief to an under banked market and provide leveraged economic benefit into the broader economy.

This is a clear win for all parties. But what can the greater fintech community learn from this success?

The importance of government relationships and support for fintech companies

Cato Pastoll, CEO and Co-Founder of Lending Loop, makes the point that fintech companies underestimate the importance of government relationships, particularly those in the startup phase. He suggests:

"Its up to you to educate the regulators about your business and what societal benefits it provides. You need to make yourself heard. For the most part, fintech entrepreneurs do not make it a priority to try work with government.

It can be vital, particularly in regulated industries, to find the time and make the effort. The governments role is to hear the challenges industries and people are facing and want to understand the dynamics of the market".

In his experience, regulators and government only hear part of the story and if fintech does not speak up, then regulators are left with only the incumbents viewpoint.

Government recognizes that Canada can play a bigger game

In a study released in December last year, the Canadian Competition- Bureau, observed:

"...other jurisdictions have more welcoming and innovationconducive regulatory environments than Canada. The United Kingdom, the United States, Singapore, Germany, Australia and Hong Kong have been identified as leading fintech hubs based on talent, funding availability, government policy and demand for fintech".

This contrasts with the position in Canada, where regulatory gaps, uncertainty and lack of consistency across provinces prevail.

An 11-point plan has been proposed, that includes harmonizing regulation across geographic boundaries, and identifying a fintech policy lead for Canada. These solutions would go a long way to addressing key roadblocks in the growth and development of Canadian fintech. Additionally, Craig Asano, Executive Director of the NCFA, makes the point that:

To help verify Canadas competitive position relative to other jurisdictions, additional resources and support are needed for data collection and education. This will help quantify the number of fintech companies, capital investments, financings and loan volumes of new funding models, and the time and cost spent on compliance.

The Canadian government is extremely well placed to support the sector. The Business Development Bank of Canada (BDC) is the largest VC fund in the country with over $1 billion in capital under management. Most Canadian VC funds have government money, either directly through BDC investing in the funds or indirectly through funds of funds that in turn invest in VC's.

The significance of government involvement and ability to support and foster a sustainable fintech sector, with market confidence is critical. The C.D. Howe Institute makes the case for a suite of recommendations that, if adopted, will better position Canada to take advantage of its investments in the technological revolution that is underway throughout the economy.

Right way round regulatory sandboxes could offer short term benefits

While Canada makes use of regulatory sandboxes to help start-ups test new products or services in a controlled environment, there is room to improve the model. Unlike competitor countries including the UK and Australia, which offer flexible and proportional regulatory frameworks, Canada follows a more paternalistic model.

See:  How Blockchain and Crypto are Impacting Canadian Fintech Markets

Cato Pastoll says the Canadian model has it the wrong way around.

In Canada one must adjust your business to fit in with the existing regulatory models rather than forcing regulators to figure out how best to regulate.

Getting this right is critical in his view, particularly if we are going to compete with other countries.

What this requires is a mind shift followed by active dialogue between stakeholders and industry to work out a better framework for regulatory sandboxes.

That said, there are some areas of fintech where accelerator programs and innovation hubs are showing strong results.

Artificial Intelligence and Blockchain is accelerating in Canada

KPMG International in their Pulse of Fintech Q4'17 Report, highlights AI as a major driver of innovation in the Americas, particularly in the US and Canada.

It refers to Canada as, "a hotbed for fintech innovation", and goes on to say that Canada’s participation in the space is getting more notice with world-class fintech hubs in Canada rapidly maturing with increased attention from US investors.

Crypto currency and blockchain related ventures are also recognizing Canada as a friendly jurisdiction.  With strong investor appetite available, crypto mining companies, Hut 8 Mining, BitFury and HIVE have all come to market to capital through the TSX-V.

See:  Registration Open: Convergence of the titans: Nobel Peace Prize Recipient, Irakli Beridze, to Present in Toronto at AiDecentralized Summit (May 22)

More recently, the Ontario Securities Commission consented to the listing of the first Canadian Bitcoin ETF on the TSX under the ticker, HBLK which invests in companies involved in blockchain and distributed ledger technologies.

And over the past few days, Huobi a Singapore-based bitcoin exchange, (and the world’s number three exchange by 24-hour volume), has stated its intention to expand its operations to Toronto.

General Manager of Huobi, Ross Zhang stated;

"Canada is emerging as a leading blockchain nation, and Toronto is set to become one of the next most active blockchain hubs across North America".

Canada's fintech time is now

This serves to demonstrate that If Canada is to capitalize on the wave of fintech opportunity washing our shores, we need to act swiftly and get our regulatory house in order.

Without the need to reinvent the wheel, we can borrow from global best practices. We must continue to lobby for a unified regulatory framework and insist that the Federal Government champion fintech. Fintech after all has the wherewith-all to make a marked difference in our economy.

It would be a sad day if in years to come, we look back and wonder how we let slip what could have been ours to have.

 

Gary Buisansky is a freelance writer for NCFA and founder of Coin My Copy  which specializes in writing marketing content, including white papers, website copy, articles and case studies for fintech and traditional finance companies.

 


The National Crowdfunding & Fintech Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with cryptocurrency, blockchain, crowdfunding, alternative finance, fintech, P2P, ICO, and online investing stakeholders globally. NCFA Canada provides education, research, industry stewardship, services, and networking opportunities to over 1700+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding and fintech industry.  Join Canada's Fintech & Funding Community today FREE!  Or become a contributing member and get perks. For more information, please visit:  www.ncfacanada.org

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