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 Regulations
US Lawmakers to Vote on FIT21 Crypto Regulation
Digital Asset Regulation | May 20, 2024
Image: Freepik
US lawmakers to vote by end of month on The FIT21 Act to establish a clear regulatory framework for digital assets
The Financial Innovation and Technology for the 21st Century Act (FIT21) is a crucial legislative effort to regulate the burgeoning digital asset industry in the United States. Passed out of committee in July 2023, the bill, known as (HR 4763), is now approaching a full floor vote in the House expected by the end of this month.
The FIT21 Act has garnered substantial bipartisan support, reflecting a broad consensus on the need for a structured regulatory framework for the crypto industry. However, the bill still faces significant hurdles, including passing the Senate and securing presidential approval. The current administration's cautious stance on crypto adds a layer of complexity, but the broad support suggests a reasonable chance of success.
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
On May 16, the Crypto Council for Innovation (CCI), representing major crypto industry groups and public companies like Coinbase (COIN) and Block (SQ), urged lawmakers in a letter of support to provide regulatory clarity and support the bill.
Why the FIT21 Act Matters
Regulatory Clarity
The FIT21 Act seeks to resolve the ambiguity surrounding the roles of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in regulating digital assets. By clearly defining the regulatory responsibilities, the bill aims to create a stable environment conducive to business operations and innovation.
See: Balancing Fintech Innovation and Regulation
The FIT21 Act is part of a broader legislative effort to regulate digital assets. For instance, Chairman McHenry’s Clarity for Payment Stablecoins Act also seeks to regulate stablecoin issuers through federal and state frameworks. Comparing these proposals highlights the comprehensive approach of the FIT21 Act in addressing various aspects of digital asset regulation, from market structure to consumer protection.
Enhanced Consumer Protection
One of the core components of the FIT21 Act is its focus on consumer protection. The bill mandates stringent security and transparency standards for digital asset platforms. These measures are designed to prevent incidents like the collapse of major exchanges such as FTX, ensuring that platforms operate with high levels of integrity and reliability. This focus on consumer protection is vital for building trust in the crypto ecosystem.
Potential Outcomes of the FIT21 Act
If the Bill Passes
- Passage of the FIT21 Act would likely lead to a more favorable investment climate for digital assets. Institutional investors would feel more confident entering the market, leading to increased capital flows and the potential for significant technological advancements.
See: 2024 Budget: Crypto ETFs & Registered Accounts Consultation
- With stringent security and transparency requirements, consumer confidence in the crypto market would be bolstered. This trust is essential for the widespread adoption of digital assets and for the long-term viability of crypto platforms.
- The US could position itself as a global leader in crypto regulation, setting a standard that other countries might follow. This leadership could enhance the competitiveness of US-based crypto businesses on the international stage.
If the Bill Does Not Pass
- The absence of a comprehensive federal framework could lead to a patchwork of state regulations, complicating compliance for crypto businesses operating across multiple jurisdictions. This fragmentation could further hinder the growth of the industry.
- Failure to pass the FIT21 Act would maintain the current state of regulatory ambiguity. This uncertainty could deter institutional investors and stymie the growth and innovation potential of the US crypto market.
See: Challenges in Global Crypto Regulations – Lessons from Dubai
- Without the enhanced consumer protection measures outlined in the FIT21 Act, risks to consumers would remain high. Incidents like the collapse of major exchanges could continue to undermine trust in the market.
Gary Gensler, SEC Chairman issued a lengthy warning of the risks about the bill:
"The crypto industry's record of failures, frauds and bankruptcies is not because we do not have rules or because the rules are unclear. It's because many players in the crypto industry don't play by the rules."
Outlook
The bill's progress through Congress will be closely watched as its passage would provide much-needed regulatory certainty, fostering innovation and economic growth while protecting consumers, especially given the current political climate. The upcoming 2024 presidential election could also influence its fate, as candidates may use the bill to appeal to tech-savvy and economically progressive voters. Crypto regulation is poised to be a defining issue in the 2024 election, reflecting broader debates about innovation, financial freedom, and regulatory oversight.
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
 |  |  |
|---|---|---|
 |  |  |
Balancing Fintech Innovation and Regulation
Regulating Innovation | May 16, 2024
Image: Freepik/rawpixel.com
Balancing Innovation and Regulation in Financial Services. Key Messages and Insights from Governor Michelle W. Bowman's Speech
In a recent speech at the Digital Chamber DC Blockchain Summit 2024, Governor Michelle W. Bowman of the Federal Reserve provided a comprehensive view on the balance between innovation and regulation in the financial services sector. This article delves into the key messages from her speech, exploring the implications for financial institutions and the burgeoning fintech industry.
1. Emphasizing the Importance of Understanding Innovation
Governor Bowman underscores the necessity of a thorough understanding of financial innovations, suggesting that effective policy-making hinges on regulators' and financial institutions' deep comprehension of new technologies. She said:
"Before we craft a useful public policy around innovation in banking, we need to understand the various dynamics involved with particular innovations."
See: Insights from the UK’s Pro-Innovation Regulation Review
This approach demands that both regulators and financial institutions invest in knowledge and frameworks that can accurately assess the impact and scope of new technologies, such as blockchain and digital currencies. It's a call for a more informed regulatory process that recognizes and accommodates the fast-paced evolution of financial technologies.
- Regulators should invest in continuous education and training programs to keep their teams updated on technological advancements.
- Encourage partnerships between regulatory bodies and fintech companies to foster a mutual understanding of technological impacts.
- Governments and private entities should fund collaborative research into new financial technologies to better understand their implications before they reach the market.
2. The Dual Role of Innovation and Regulation
Bowman discussed the intrinsic dual nature of innovation—its potential to improve efficiency and competition, and its ability to introduce new risks:
"Innovation can lead to greater efficiency, and it can promote competition in the market... [but] innovation is inevitably accompanied by risk."
For fintechs and financial institutions, this confirms the need for a balanced approach that does not stifle innovation with overly rigid regulations, while still protecting consumers and maintaining systemic stability. She points out that innovation can greatly enhance efficiency and competition but also brings new risks that must be managed thoughtfully.
See: Balancing AI Innovation and Intellectual Property Rights: Key Insights from the U.S. Senate Subcommittee Hearing
- Develop regulatory frameworks that are flexible enough to accommodate new innovations but robust enough to safeguard systemic stability.
- Regularly update risk assessment protocols to include new risks brought about by technological advancements.
- Increase efforts to educate consumers on the benefits and risks of new financial products and services.
3. Openness to Innovation
Emphasizing the need for regulatory bodies to be open to innovation, Bowman pointed out the typical initial resistance against new technologies and methodologies in the financial sector:
"The use of emerging technology and innovation may require a change in policy or supervisory approach."
This openness is crucial for fostering an environment where new financial technologies can thrive. Regulatory bodies need to be agile, adapting their frameworks to facilitate advancements rather than obstruct them.
See: Challenges in Global Crypto Regulations – Lessons from Dubai
- Create environments where fintechs can test new products under regulatory supervision. So adopt open regulatory sandboxes that support innovation.
- Hold frequent stakeholder forums that bring together regulators, fintechs, and traditional financial institutions to discuss innovation.
- Establish clear and accessible channels for businesses to provide feedback on regulatory practices that affect innovation.
Image: Freepik/rawpixel.com
4. Promoting Innovation Through Regulation
Bowman proposed that regulatory frameworks should not only manage but actively promote innovation:
"Regulators can do more than simply tolerate innovation, they can promote it through transparency and open communication."
See: The Global Effort to Level the Playing Field with Tech Giants
This suggests a proactive role for regulators in the innovation process, which could include providing clearer guidelines and quicker feedback on new financial products and technologies. Such involvement could enhance the overall effectiveness and reach of financial services.
- Regulators should provide clear, concise, and publicly accessible guidelines for compliance with new financial technologies.
- Encourage and support pilot programs that allow financial institutions to explore new technologies in a controlled environment.
- Improve communication channels between regulators and financial institutions to ensure that all parties are aligned on the expectations and benefits of new technologies.
5. Ensuring Safety and Compliance
The Governor stressed the importance of maintaining safety and compliance within innovative practices:
"Innovation and regulatory and legal requirements can coexist—providing both enhanced capability and regulatory compliance."
See: FCA Speech: Adapting Culture to Meet Changing Societal Norms and Consumer Expectations
For financial institutions and fintechs, this means that while innovation is necessary, it cannot come at the expense of legal and regulatory obligations. Ensuring that new technologies adhere to these standards is essential for their sustainable integration into the financial landscape.
- Ensure that new financial products are designed with compliance and safety in mind from the outset.
- With the adoption of new technologies, reinforce and strengthen cybersecurity protocols to protect consumer data and financial assets.
- Conduct regular audits and assessments of new technologies to ensure they meet regulatory standards and are safe for consumer use.
Conclusion
Governor Bowman's insights provide a roadmap for balancing innovation with regulation in a way that promotes growth and stability in the financial sector. The principles of understanding, openness, and proactive regulation, will likely shape the future of financial regulation, fostering an environment where both traditional financial institutions and fintechs can innovate responsibly and effectively.
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
| | |
|---|---|---|
| | |
Canada’s Proposed Mutual Fund Crypto Regulations 2024
Crypto Regulations | May 14, 2024
Image: Freepik
Strategic Update on CSAs Proposed Crypto Regulations for Mutual Funds
On January 18, 2024, the Canadian Securities Administrators (CSA) published proposed amendments aimed at enhancing investor protection by refining the frameworks under which mutual funds can engage with cryptocurrencies, specifically "Notice and Request for Comment – Proposed Amendments to National Instrument 81-102 Investment Funds Pertaining to Crypto Assets".
Main Changes and Impact
- The proposed regulations would only allow mutual funds classified as 'Alternative Mutual Funds' to invest in cryptocurrencies exclusively. This classification aims to limit exposure to the volatile crypto market to more sophisticated investment vehicles that are better equipped to manage higher risks.
- A significant aspect of the new rules is the requirement for all crypto investments by mutual funds to be made in assets traded on recognized, regulated exchanges. So, at this point that would only include Bitcoin (BTC) and Ethereum (ETH) as qualifying crypto assets that would be available for trading. This measure seeks to reduce the risks associated with unregulated markets and enhance the overall stability of the financial ecosystem.
See: Resurgence of Cryptoassets in Canada’s Investment Landscape
By mandating investments in regulated venues, the regulations aim to shield investors from the unpredictable nature of many crypto assets. The move is expected to foster a more stable and reliable market environment. While the regulations are primarily protective, they also pose questions about potential limitations on innovation and the growth of Canada's crypto market.
Perspectives and Reactions
While regulators view these changes as a necessary step to ensure the safety and integrity of the financial market, there's a balance to be struck between protective oversight and stifling regulation. The Investment Executive published a piece citing 'industry pushback on proposed crypto holdings - only for alt funds?'
1. Investor Advocates (Ontario Securities Commission's Investor Advisory Panel)
"[Investments in non-exchange traded crypto assets present too much risk...]"
See: Canada to Enforce Cryptoasset Reporting by 2027
Advocates emphasize the need for strict regulations to protect retail investors from the inherent risks of non-exchange traded and non-fungible crypto assets. They support the CSA's proposals as a way to safeguard investor interests against speculative and volatile investments.
2. Alternative Investment Management Association (AIMA)
"[These stringent provisions may stifle market and product development...]"
AIMA argues that restricting crypto investments to assets traded on regulated exchanges might limit market opportunities to major cryptocurrencies like Bitcoin and Ether, thereby hindering broader market and product development.
3. Investment Industry Association of Canada (IIAC)
"[Investors may be better protected if they are able to gain exposure to cryptoassets through a regulated investment product...]"
See: CRA Pursues $54 million in Unpaid Crypto Taxes
IIAC suggests that regulated investment products offer better protection for investors than direct purchases of cryptoassets, advocating for more flexible regulations that can include a broader array of crypto products.
4. 3iQ Corp (Toronto-based fund manager)
"The outright prohibition of lending activities is a brute force approach that removes the ability for asset managers to innovate in Canada...[Leaning in to providing regulated products will actually better protect consumers...]"
3iQ emphasizes the importance of regulated products in protecting investors, especially in light of the recent high-profile failures in the crypto market. They advocate for regulations that do not stifle innovation but instead support the development of safe investment options.
5. The Canadian Blockchain Consortium
"The Canadian cryptoasset industry requires separate statutory oversight (and potentially an independent regulator) instead of integrating trading platform requirements into existing securities legislation...”
See: BRICS Announces Launch of Blockchain Payment System
This segment criticizes the proposed regulations for being overly restrictive, potentially stifling innovation and limiting growth in the Canadian crypto market. There is a significant concern that these constraints could push investors towards less-regulated markets.
Outlook
As these rules transition from proposal to enforcement, they will reshape how crypto investments are perceived and handled in Canada. At the National Crowdfunding & Fintech Association (NCFA Canada), we believe that an appropriate balance between innovation and regulation must exist for healthy and sustainable markets while maintaining Canada's competitiveness in the global fintech industry. We advocate for regulations that support the development of safe investment options and globally competitive products without stifling innovation.
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
| | |
|---|---|---|
| | |
FINTRAC Fines Binance $6M CAD for Compliance Failures
Enforcement | May 12, 2024
Image: Freepik/rawpixel.com
Binance Faces $6M CAD Fine for Compliance Failures in Canada
The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) has fine Binance Holdings Limited $6M CAD for failing to adhere to Canada's financial regulations. This fine is part of broader regulatory scrutiny that has seen Binance face legal challenges in several jurisdictions, including a significant $4.3 billion settlement with U.S. regulators for similar compliance failures.
See: Canadian Investors Lead Class Action Against Binance Canada
The two violations that led to Binance being fined C$6 million by FINTRAC are:
- Binance did not register as a foreign money services business (FMSB) with FINTRAC, despite being given multiple opportunities to do so. This registration is crucial for entities engaging in money services within Canada to ensure compliance with the country's financial regulatory framework.
- Binance failed to report 5,902 cryptocurrency transactions that each exceeded C$10,000, along with their necessary Know Your Customer (KYC) information. Such reports are mandatory under Canadian financial laws to monitor and prevent illegal activities such as money laundering.
These breaches reflect issues with compliance and regulatory adherence by Binance in the Canadian financial environment. More details can be found on the FINTRAC penalties page here.
Sarah Paquet, Director and Chief Executive Officer, Financial Transactions and Reports Analysis Centre of Canada:
“Canada’s Anti-Money Laundering and Anti-Terrorist Financing Regime is in place to protect the safety of Canadians and the security of Canada’s economy. FINTRAC will continue to work with businesses to help them understand and comply with their obligations under the Act. We will also be firm in ensuring that businesses continue to do their part and we will take appropriate actions when they are needed.”
Conclusion
Apart from Canada, Binance also faces legal issues in countries such as Nigeria and continues to be involved in investigations and lawsuits that could affect global regulatory frameworks for digital assets. Also see: Philippines SEC Blocks Binance for Failing to Secure License.
See: SEC Enforcement Director Grewal On Crypto Regulation
These regulatory actions have a noticeable impact on Binance's operations, including its decision to exit certain markets like Canada, reflecting how regulatory pressures can influence business strategies.
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
| | |
|---|---|---|
| | |
SEC Issues Wells Notice to Robinhood Over Crypto
Crypto Enforcement | May 6, 2024
Image: Robinhood markets inc
Robinhood receives Wells Notice from SEC over crypto operations. Vows to fight for regulatory clarity.
On May 6, 2024, Robinhood Markets announced that it received a Wells Notice from the SEC, signaling potential enforcement action regarding its cryptocurrency offerings. This notice follows an extended period of regulatory scrutiny over how cryptocurrencies are classified and handled by financial platforms.
See: 2024 Budget: Crypto ETFs & Registered Accounts Consultation
Robinhood, known for democratizing stock market trading, has expanded aggressively into cryptocurrencies, a move that has now attracted heightened regulatory attention.
Dan Gallagher, Chief Legal, Compliance and Corporate Affairs Officer, Robinhood Markets, Inc.
“After years of good faith attempts to work with the SEC for regulatory clarity including our well-known attempt to ‘come in and register,’ we are disappointed that the agency has decided to issue a Wells Notice related to our U.S. crypto business. We firmly believe that the assets listed on our platform are not securities and we look forward to engaging with the SEC to make clear just how weak any case against Robinhood Crypto would be on both the facts and the law.”
"To our customers, this development will not affect your account or the services we provide. Robinhood Crypto is here to stay and we’ll keep innovating, shipping products, and fighting for regulatory clarity for the good of the industry and our customers."
This story is developing...
Outlook
In addition to Robinhood, Coinbase and Uniswap are among the major entities that have been targeted with Wells Notices from the U.S. Securities and Exchange Commission (SEC) just recently. Coinbase, a prominent cryptocurrency exchange, received a Wells Notice earlier this year, signaling the SEC's intention to potentially pursue enforcement action. Similarly, Uniswap, known for its decentralized exchange services, also received a notice, marking an increase in regulatory scrutiny within the crypto sector
See: Consensys Sues the SEC Over Ethereum’s Status
All of these active investigations may set significant precedents for how digital assets are classified and regulated, influencing the operational and strategic decisions of fintech firms. This is a critical watch point for investors and founders within the sector, as it could dictate the pace and direction of innovation and market participation in the coming years.
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
| | |
|---|---|---|
| | |
Changpeng Zhao Sentenced to 4 Months Prison
CZ | May 1, 2024
Image: Freepik
The Sentencing of Changpeng Zhao (CZ): A Turning Point for Crypto Regulation?
Despite federal prosecutors wanting CZ behind bars for 3 years, the iconic founder of Binance, Changpeng Zhao (CZ), has been sentenced to four months in prison for violating anti-money laundering laws in the U.S. bringing another crypto saga to pass, and signalling a potential turning point for the regulation of the cryptocurrency market.
See: Canadian Investors Lead Class Action Against Binance Canada
Zhao's sentencing is part of a broader crackdown on cryptocurrency exchanges globally. In recent years, regulators have been clear that they will not hesitate to enforce laws strictly to ensure consumer protection and financial stability, otherwise known as 'regulation by enforcement'. By setting this precedent, regulators are signaling their commitment to upholding stringent standards in the industry.
- In addition to CZ's $50 million personal fine, Binance agreed to pay $4.3 billion fine and implement new measures to prevent similar violations in the future and has undertaken extensive internal reviews and operational adjustments to comply with international financial regulations. This includes enhancing their anti-money laundering protocols and cooperation with global financial authorities.
- Following the announcement of Zhao's sentencing, Binance's trading volume saw an initial dip of 7%, reflecting immediate market reactions and investor sentiment. However, this didn't last along and was followed by a gradual recovery as the market absorbed the impact of the news. Financial analysts have noted that while short-term impacts are evident, the long-term implications hinge on how effectively Binance and similar entities can adapt to increased regulatory expectations.
- Interestingly, on prediction marketplace, polymarket, the majority of betters or 42% predicted that CZ's jail sentence term would be <6months.
CZ said before being sentenced by US District Judge Richard A Jones:
“I failed here. I deeply regret my failure, and I am sorry. I believe the first step of taking responsibility is to fully recognise the mistakes. Here I failed to implement an adequate anti-money-laundering program … I realise now the seriousness of that mistake.”
See: US Treasury Demands DeFi Adhere to Anti-Money Laundering Rules
Dennis Kelleher, Head of the financial reform advocacy group Better Markets (wrote in an email)
"'Crime pays' is the message sent today. Zhao will still get to keep his vast wealth."
Conclusion
This highlights the escalating costs of non-compliance for fintech companies, which can include heavy fines, operational disruptions, significant damage to reputation and prison time. Time will tell if this outcome triggers a turning point in the SECs enforcement by regulation or a continuation.
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
| | |
|---|---|---|
| | |
2024 Budget: Crypto ETFs & Registered Accounts Consultation
Consultation | April 29, 2024
Department of Finance is Asking Whether Crypto ETFs Should Be Allowed in Canadian Registered Accounts
Buried in the supplementary notes of the 2024 Federal Budget, there's a key consultation question regarding the potential inclusion of cryptocurrencies as qualified investments in registered retirement and savings accounts like RRSPs and TFSAs. Cryptocurrencies and non-fungible tokens (NFTs) are not considered "qualified investments" for RRSPs under current regulations. However, cryptocurrency-based exchange-traded funds (ETFs) that are listed on designated stock exchanges like the Toronto Stock Exchange (TSX) or the New York Stock Exchange (NYSE) do qualify as RRSP investments. This differentiation is crucial because it allows for indirect investment in the crypto market through regulated financial products that meet the legal standards for RRSPs.
See: Resurgence of Cryptoassets in Canada’s Investment Landscape
- Currently, direct holdings of cryptocurrencies or NFTs in RRSPs could invoke a penalty tax of 50% of the fair market value of each non-qualified investment. However, the Canada Revenue Agency (CRA) has the discretion to waive this penalty under certain circumstances, such as reasonable error or where transactions also result in other taxable events.
- There has been a surge in cryptocurrency-based ETFs, which are considered a safer way to include crypto investments in retirement plans due to their adherence to standard financial regulations and their presence on major stock exchanges. Recently approved in the U.S.; Approved mid-April and starts trading April 30 in Hong Kong; Canada approved a raft of crypto ETFs years ago.
- The federal government is actively seeking public feedback on whether cryptocurrency-based ETFs should be considered qualified investments for various registered plans. This consultation reflects a broader reassessment of the investment limitations imposed by the Income Tax Act on registered plans, which aim to ensure that these savings tools contain safe and stable investments. Historically, these rules have been designed to protect investors by limiting their exposure to more volatile and potentially risky assets.
Consultation Questions (learn more)
Budget 2024 encourages stakeholders to provide feedback on modernizing the rules for "qualified investments" to enhance the clarity and consistency of the Registered Plans system.
See: CSA Updates on Value-Referenced Crypto Assets Regulation
- Whether and how the rules relating to investments in small businesses could be harmonized to apply consistently to all registered savings plans.
- Whether annuities that are qualified investments only for RRSPs, RRIFs, and RDSPs should continue to be qualified investments.
- Whether the conditions that certain pooled investment products must meet to be a qualified investment are appropriate, including the ongoing value of maintaining a formal registration process for registered investments.
- Whether and how qualified investment rules could promote an increase in Canadian-based investments.
- Whether crypto-backed assets are appropriate as qualified investments for registered savings plans.
One key aspect under review is the harmonization of investment rules across different types of registered plans, which could lead to a more streamlined and understandable set of regulations for investors
Why This Matters - Your Voice Counts!
The outcome of this consultation could significantly impact Canadian investors, potentially broadening their investment choices within registered retirement and savings plans. This could offer a way to diversify retirement portfolios with assets that have not traditionally been part of these tax-advantaged accounts. Moreover, it aligns with a global trend of integrating digital assets into mainstream financial products, providing Canadian investors with opportunities that reflect the evolving financial landscape.
Canadians are invited to share their views on this topic by emailing their submissions to the Department of Finance at QI-consultation-PA@fin.gc.ca by July 15, 2024.
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
| | |
|---|---|---|
| | |
