Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Blockchain, Crypto, Digital Assets, Tokens, CBDCs, Stablecoins, Metaverse, NFTs
CRA Tax Implications for Individuals and Crypto Platforms
Crypto Tax | Nov 29, 2023
Image: Unsplash/Towfiqu barbhuiya
The Canadian Revenue Agency (CRA) Has Clarified That Crypto Deposits on Trading Platforms May Trigger Taxes
As deftly summarized in this November 2023 client update article from Goodman's LLP, the CRA suggests that:
-
A client holding cryptocurrency through a centralized Crypto Trading Platform (CTP) may not actually own the cryptocurrency for Canadian income tax purposes.
-
Depositing cryptocurrency with a trading and lending platform could be considered a disposition for Canadian tax purposes, making it a taxable event for the client.
Notes
- The CRA's response was based on two specific questions. The first question involved a Canadian taxpayer who lost bitcoin due to fraud on a platform. The CRA's response highlighted the need to determine the nature of ownership and the platform's liability in such cases.
- The loss's tax treatment depends on whether the cryptocurrency was held as a business or as a capital investment and the contractual relationship between the taxpayer and the CTP.
See: Proposed Changes to Crypto Mining GST/HST Rules: What’s Capture and What’s Not?
- The second question addressed the tax implications when a taxpayer transfers bitcoin to a platform offering a return, payable in bitcoin. The CRA concluded that such a transfer likely constitutes a disposition for tax purposes, as the platform acquires the right to use and dispose of the assets.
Takeaways
The CRA's positions have substantial implications for both CTPs and their Canadian clients.
- CTPs and crypto platforms should review their contractual arrangements to determine if they imply a transfer of ownership of the cryptocurrency to them. They might need to modify their agreements to prevent unintended tax consequences for their clients.
- Canadian taxpayers could face significant unforeseen tax liabilities. Depositing cryptocurrency with a CTP, even without the intention of immediate disposal, could realize capital gains.
See: UK Leading Charge in Global Crypto Tax Crackdown
It is crucial for both parties to understand these tax implications and adjust their strategies accordingly. CTPs, in particular, should consider revising their user agreements to minimize the risk of unintended tax consequences for their clients.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
 |  |  |
|---|---|---|
 |  |  |
BoC Update on The Digital Canadian Dollar Initiative
Canadian Digital Dollar | Nov 29, 2023
Image by katemangostar on Freepik
Bank of Canada Publishes Stakeholder Feedback on The Canadian Digital Dollar Initiative
Since 2020, the Bank of Canada has actively engaged with Canadians and stakeholders to gather insights on the digital Canadian dollar. This has included diverse discussions with the financial sector, focus groups, civil society groups, and an online public questionnaire. The Bank of Canada's report, "A Digital Canadian Dollar: What we heard 2020–23 and what comes next", provides a feedback lens across several themes.
Key Feedback Themes
- There's a shared interest in accessibility and financial inclusion ensuring that the digital dollar caters to underserved communities, with a focus on making it accessible without stringent identification requirements. This approach aims to bridge gaps in current digital payment offerings and promote universal access.
- Stakeholders emphasized the importance and concerns of privacy, advocating for a digital currency that offers the anonymity of banknotes. The public expressed strong reservations about sharing personal information and the potential overreach of privacy laws.
See: Bank of Canada Publishes Staff Paper on ‘Unmet Payment Needs and CBDCs
- The importance of maintaining access to physical currency was highlighted, with suggestions to mandate merchant acceptance of banknotes to support marginalized communities.
- The need for robust cybersecurity measures was a common concern, with varying levels of confidence in the Bank's ability to provide such security. The idea of a digital dollar functioning without an internet connection was also discussed for practical resilience and inclusivity.
- Financial institutions such as banks and credit unions expressed the need for more detailed information to understand the potential impact on their business models and financial stability. Concerns were raised about the digital dollar replacing bank deposits and accelerating bank runs during crises.
The decision to introduce a digital dollar will ultimately be made by Canadians through their representatives in Parliament, with a focus on balancing privacy, accessibility, and financial stability. The Bank is exploring various models and technologies to support a potential digital dollar, ensuring readiness for the future digital economy.
See: BoC: Redefining Financial Inclusion for CBDCs
Looking Forward
While the path forward involves complex considerations and diverse stakeholder interests, the final decision, however, rests with Canadians and their representatives, ensuring that any future digital currency aligns with the nation's values and needs.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Bitfarms Ltd. Announces Upgrade to Its Mining Operations
Bitcoin Mining | Nov 28, 2023
Image by Freepik
Bitfarms Ltd., a Canadian-based and publicly traded on NASDAQ and TSX, a leading global bitcoin mining company, recently announced a significant upgrade to its mining operations to boost the company's operational capacity and efficiency.
The upgrade involves the acquisition of 35,888 Bitmain T21 miners, with an option for an additional 28,000 units, potentially elevating Bitfarms' operational capacity to an impressive 17 EH/s and 391 MW by the second half of 2024.
See: One of Biggest Bitcoin Mining Firms in Canada, Bitfarms, to Adjust HOLD Strategy
- Last week, Bitfarms announced a $60 million Canadian private placement with U.S. institutional investors with the net proceeds from this private placement earmarked for the acquisition of new miners, expansion of infrastructure, and enhancement of the company's working capital.
- Bitfarms' purchase of 35,888 Bitmain T21 miners, priced at $2,660 each, enables unparalleled efficiency and mining power. This upgrade aligns with the upcoming bitcoin halving in April 2024, an event that typically triggers increased market activity and valuation fluctuations.
- The new T21 miners boast a highly efficient 3 Phase 415v PSU and High Energy Mode, aligning with global shifts towards sustainable mining practices.
Third Quarter 2023 Results
Bitfarms Ltd.'s financial results for the third quarter of 2023 highlights the company's earnings of 1,172 BTC, an increase in hashrate to 6.1 EH/s, and the development of operating capacity to 290 MW in Q1 2024. The report also covers the company's strategic expansions and upgrades in its mining operations, including the use of renewable power in Québec and low-cost energy in Latin America.
Importance of the Upgrade
Bitfarms Ltd.'s strategic upgrade demonstrates a forward-thinking approach, balancing technological advancement with environmental responsibility. This move not only prepares Bitfarms for the upcoming challenges in the cryptocurrency world but also sets a new benchmark for others in the industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
Ex-Binance CEO CZ Faces Up to 10 Years in Prison
Crypto | Nov 28, 2023
Image: Unsplash/Kanchanara
Ex-Binance CEO Changpeng Zhao Faces Up to 10 Years in Prison Amid Bank Secrecy Act Violations
Changpeng Zhao, the former CEO of cryptocurrency exchange Binance, is currently facing a potential prison sentence of up to 10 years. This development follows his guilty plea for violating the Bank Secrecy Act. The U.S. Department of Justice (DOJ) has expressed frustration over Zhao's permission to reside in the UAE until his sentencing, considering his billionaire status and the UAE's lack of an extradition treaty with the U.S.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
Key Points
- Zhao has been charged by the DOJ for violating the Bank Secrecy Act, with the prosecution possibly arguing for a maximum 10-year term. This is a significant increase from the initially anticipated 12-18 month sentence.
- Binance has agreed to pay a massive $4.3 billion fine, marking one of the largest enforcement actions against a crypto platform. Zhao himself was personally fined $50 million.
- Attorneys for Zhao, a dual citizen of Canada and the UAE, submitted a motion last Thursday to the Western District of Washington in Seattle. They argued that Zhao is not a flight risk, emphasizing his voluntary appearance in court to enter a guilty plea to the charges.
- Despite his guilty plea, Zhao has been allowed to travel to and live in the UAE until his sentencing. This decision is contentious due to his wealth and the UAE's non-extradition status with the U.S.
See: UK Leading Charge in Global Crypto Tax Crackdown
Importance of the Case
This case is a landmark in terms of legal action against a major figure in crypto, highlighting the increasing scrutiny and regulatory actions in the industry, and importance of compliance with laws like the Bank Secrecy Act. This case could set a precedent for how legal systems worldwide handle similar situations in crypto.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
How Permissioned DeFi Will Transform Global Payments
DeFi Payments | Nov 27, 2023
Image from Fireblocks and BCG Analytics
How Permissioned DeFi is revolutionizing cross-border payments with efficient, cost effective, secure and regulatory compliant transactions
The challenges of both traditional and permissionless DeFi for payments: Traditional cross-border payment systems are often slow, expensive, and lack transparency. Permissionless DeFi, while offering advantages such as near-instant transfers and better traceability, falls short in terms of anti-money laundering (AML) and Know Your Customer (KYC) functions, making it vulnerable to fraud and erroneous payments. These shortcomings have hindered its widespread adoption by financial institutions.
See: JPMorgan’s New Programmable Payments in Blockchain
Best of Both Worlds with Permissioned DeFi
Permissioned DeFi solves these concerns by integrating the best of both worlds: the efficiency of DeFi and the necessary compliance controls. This model involves several key steps and 8 key participants, ensuring a secure, compliant, and efficient process for cross-border transactions. Here's the step-by-step process below:
Step 1. KYC Process and Whitelisting: Institutions undergo a platform-level KYC process conducted by whitelisters, who approve users and add their digital wallets to the allowed list. Institutions can act as whitelisters or appoint third parties for this role.
Step 2. Initiating the Transaction: Once KYC-approved, a sender (individual, business, or institution) can initiate a cross-border fiat money transfer.
Step 3. On-Ramp Instruction to OOSP: The sender’s fiat balance is debited by an On- and Off-Ramp Service Provider (OOSP), and the sender’s digital wallet is credited with a token of equivalent value.
Step 4. Token Types: The model can use various tokens, like bank-issued stablecoins or central bank digital currencies (CBDCs), representing the transaction’s main payment format.
See: Insights Into Canada’s Evolving Payments Landscape
Step 5. Wrapping the Token: The token received in the digital wallet is wrapped by a service provider for interoperability across blockchains. The wrapping process involves locking the initial token in a smart contract and minting an equivalent amount of the wrapped token.
Step 6. Smart Contract and AMM: A smart contract deployed on the permissioned DeFi protocol handles the transfer of the wrapped token. An Automated Market Maker (AMM) provides a liquidity pool to facilitate trades and ensure near-instant settlement.
Step 7. Unwrapping and Off-Ramping: Receivers can unwrap the received token on another blockchain network.If fiat currency is preferred, an off-ramp step converts the token back to fiat, crediting it to the receiver’s bank account.
Cost Advantage
The use of permissioned decentralized finance (DeFi) with cross-border payments is estimated to be 80% cheaper than a traditional global payment transaction.
Let's compare the two payment methods by cost category in the table below which clearly illustrates the cost-effectiveness of permissioned DeFi in cross-border payments, highlighting the potential for significant savings for both payment service providers and end customers.
| Cost Category | Traditional Payments | Permissioned DeFi-Based Payments |
|---|---|---|
| Operational & IT Costs | $6.40 (80% of total) | $0.05 to $0.09 |
| Compliance Costs | $1.20 to $1.60 (15%-20% of total) | Assumed same as traditional: $1.20 to $1.60 |
| Total Cost per Transaction | $8.00 | $1.25 to $1.69 |
- There's a significant reduction in operational and IT costs in the permissioned DeFi model, dropping from $6.40 to a mere $0.05 to $0.09 per transaction.
- These costs are assumed to remain the same in both models, ranging from $1.20 to $1.60 per transaction. This assumption is based on the premise that the regulatory and compliance requirements are similar across both platforms.
- The overall cost per transaction in traditional payments is $8.00, whereas in the permissioned DeFi-based model, it ranges from $1.25 to $1.69. This represents a substantial cost reduction of approximately 80% in the permissioned DeFi model compared to traditional payment methods.
See: Bank-Issued Deposit Tokens Emerge and JP Morgan Sees Them Going DeFi
Conclusion
Permissioned DeFi is poised to redefine the landscape of cross-border payments with an efficient, cost-effective and secure solution that is compliant with regulatory standards. By addressing the limitations of both traditional payment systems and permissionless DeFi, this innovative model opens up new possibilities for global financial transactions, making them more accessible, transparent, and efficient.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
UK’s Digital Pound Initiative Sparks Privacy Discussions
Regulation | Nov 24, 2023
Image by storyset on Freepik
UK's Approach to CBDCs and Privacy
On November 7, 2023, a question raised in the UK Parliament by Mr. David Davis, a Conservative MP, brought to light the critical issue of privacy in the context of a UK CBDC. The response from Andrew Griffith, also a Conservative MP, emphasized the UK Government's commitment to ensuring rigorous standards of privacy and data protection in the design of a digital pound.
Notably, the government assures that neither it nor the Bank of England would have access to personal data or insights into consumer spending habits.
A recent development in the UK Parliament highlights the growing concern and attention towards the privacy implications of these digital currencies. As Canada's fintech community closely monitors global trends, the discussion around the UK's potential digital pound offers valuable insights.
Implications for Fintechs and Canada
For fintech companies and stakeholders in Canada, the UK's stance on privacy in the realm of digital currencies is both a benchmark and a learning opportunity. It highlights the importance of balancing innovation with consumer rights, particularly in a domain as sensitive as financial transactions. The UK's consultative approach, involving feedback from February to June 2023, also highlights the role of stakeholder engagement in shaping fintech policies.
See: Jon Conliffe Speech: A digital pound will be needed in this decade
As Canada explores the possibility of its own CBDC digital currency, the UK's model provides a framework for considering privacy and data protection. It is important for Canadian fintech innovators, regulators, and policymakers to prioritize user privacy and control while designing digital financial solutions.
The dialogue in the UK Parliament about the privacy aspects of a potential digital pound is a significant moment for the global fintech community.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
CZ Pleads Guilty. Fined $4.3 Billion in DOJ Settlement
Crypto | Nov 23, 2023
Image by Racool_studio on Freepik
Changpeng Zhao, Binance CEO steps down following $4.3 billion settlement with U.S. regulatory agencies.
- Changpeng Zhao (CZ), the CEO of Binance, has stepped down and pleaded guilty (federal court in Seattle) to breaking U.S. anti-money laundering laws as part of a $4.3 billion settlement resolving a years-long probe into the world's largest crypto exchange.
- Binance broke U.S. anti-money laundering and sanctions laws and failed to report over 100,000 suspicious transactions, including those linked to terrorist groups and illegal activities.
- The settlement includes a $3.4 billion penalty to the Financial Crimes Enforcement Network (FinCEN) and $968 million to the Office of Foreign Assets Control (OFAC), along with compliance requirements and monitoring for five years.
See: SEC Files Charges Against Binance for Mishandling Funds and Deceiving Regulators
- Reuters reported the settlement includes a $1.81 billion payment within 15 months and a further $2.51 billion forfeiture.
- Zhao will personally pay $50 million as part of the settlement, which is described as one of the largest corporate penalties in U.S. history.
- Per Coindesk and details in a legal document, he is arranging a $15 million deposit in a trust managed by Davis Wright Tremaine, distinct from the bond amount. This is to ensure compliance with the conditions of his release, with an agreement to surrender these funds in case of any violation.
- Additionally, he is securing the backing of two guarantors, who are committing $250,000 and $100,000 each.
Today, I stepped down as CEO of Binance. Admittedly, it was not easy to let go emotionally. But I know it is the right thing to do. I made mistakes, and I must take responsibility. This is best for our community, for Binance, and for myself.
Binance is no longer a baby. It is…
— CZ 🔶 BNB (@cz_binance) November 21, 2023
"These resolutions acknowledge our company’s responsibility for historical, criminal compliance violations, and allow our company to turn the page" -- Binance statement
What's Next?
- The date for his sentencing has been set for February 23, 2024, at 9 a.m. Pacific Time.
- Zhao will remain the majority shareholder of Binance and will serve as a consultant on historical areas of the business.
- Richard Teng will succeed him as CEO.
See: SEC Files Lawsuit and Accuses Kraken of Commingling
- The case against Zhao and Binance highlights the increasing regulatory scrutiny on cryptocurrency exchanges globally. The settlement is seen as a significant step towards greater compliance and regulatory oversight in the crypto industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
| | |
|---|---|---|
| | |
