In February 2022, Canada’s Department of Finance released draft GST/HST legislation covering cryptocurrency mining. The proposed rules will effectively treat cryptocurrency mining as an exempt supply
Circle is shifting many of the assets backing its USDC stablecoin from direct holdings of Treasury securities to a government-only money market mutual fund created by BlackRock for Circle’s sole use, known as the 
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
Proposed Changes to Crypto Mining GST/HST Rules: What’s Capture and What’s Not?
GST | Jan 12, 2023
In February 2022, Canada’s Department of Finance released draft GST/HST legislation covering cryptocurrency mining. The proposed rules will effectively treat cryptocurrency mining as an exempt supply
- These proposals have not yet taken effect. According to the Department of Finance, if the legislation is passed, these tax rules will retroactively come into force as of February 5, 2022.
See: Canada: Release Of Draft Tax Legislation For Consultation including GST/HST for Crypto Mining
- Section 188.2 deems the provision of “mining activity” to not be a supply for GST/HST purposes. Under the proposed legislation, mining activity covers three pursuits:
- Cryptocurrency mining: The process by which new cryptocurrency transactions are verified and recorded as a new block on the cryptocurrency network’s blockchain.
- Cryptocurrency nodes: The process of maintaining a cryptocurrency network’s blockchain and allowing access to the blockchain ledger.
- Pool mining: The pooling of computer resources by cryptocurrency miners so that they may increase their chances of being the first to validate a transaction. (Cryptocurrency mining occurs on a competitive basis. A mining reward is credited to the miner who validates the transaction first.)
- Cryptocurrency miners need not collect and remit GST/HST on the miner’s compensation from mining, but the crypto miner also cannot claim input tax credits (or ITCs) for the expenses relating to the cryptocurrency-mining operation.
See: Canadian Bitcoin Mining 2022 Recap and Outlook
- Exemption: The proposed rules for cryptocurrency mining tax in Canada contain an exception: They don’t apply when a person performs the cryptocurrency-mining activity for another person whose identity is known to the first person and who doesn’t qualify as a “mining group operator,” which basically refers to a coordinator of a mining pool. In these limited circumstances—when someone mines cryptocurrency for a known person who doesn’t coordinate a mining pool— section 188.2 doesn’t apply, and cryptocurrency miner may need to charge GST/HST on that supply of mining services.
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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, 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
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How Important is KYC for crypto transactions?
Guest Post | Jan 20, 2023
Image: Freepik/crypto
Cryptocurrency is a revolutionary new form of money and it’s here to stay. With its decentralized, digital nature, it can be utilized for financial transactions with greater privacy than a traditional currency like dollars and euros. But even though blockchain technology offers more security than other systems, there are still necessary steps that need to be taken in order to ensure that crypto transactions are done safely. In this blog, we'll be taking a look at why knowing your customer (KYC) is important for crypto transactions.
What Is KYC?
KYC stands for ‘know your customer’ and is a set of procedures required by most financial institutions. It is a process by which businesses verify the identity of their customers in order to ensure that they are not involved in any illegal activities such as money laundering or terrorism financing. This involves collecting information like names, addresses, and other documents to verify the customer’s identity.
What is AML?
AML stands for ‘anti-money laundering’, which is a set of laws and regulations to prevent criminals from using the financial system to launder money. AML requires businesses to put in place certain measures to help identify suspicious activity and ensure that customers are who they say they are.
What is Crypto?
Crypto is a digital form of currency that exists on a decentralized, secure network called the blockchain. It can be used to make payments, store value, and transfer funds without any third-party interference like banks or governments. This makes it an attractive alternative for those who want to make financial transactions without having to worry about the regulations associated with traditional currency. Transactions are secure, private and fast, so it’s no wonder that more and more people are turning to cryptocurrency as time goes by.
Why Are AML Regulations In Place?
AML regulations were put in place to protect businesses and consumers from financial crime such as money laundering. They also help ensure that the customer is legitimate and not attempting to use someone else’s identity for illegal activities. These regulations can help reduce fraud, as well as provide better protection for customers and businesses alike.
What Are Some Examples of Anti-Money Laundering Regulations?
Examples of AML regulations include customer due diligence (CDD), suspicious activity reports (SARs), and know-your-customer (KYC) processes. Let's look further into two and how they prevent money laundering:
Customer Due Diligence: This is a process where businesses perform due diligence on their customers to ensure that they are not involved in any criminal activity. This includes verifying the customer’s identity, assessing their source of funds, and monitoring their transactions for signs of suspicious activity.
Suspicious Activity Reports: Businesses are required to report any suspicious activity or transactions that may be related to money laundering. This helps prevent criminals from using the financial system for illegal activities.
Combined with KYC, these regulations help make sure that businesses are not unwittingly used for money laundering and other financial crimes. This keeps cryptocurrency transactions safe and secure, while at the same time ensuring that customer data is kept private and secure.
How Important Is KYC For Crypto Transactions?
Cryptocurrency transactions are often anonymous, meaning that there is no way to verify the identity of the sender or receiver. Therefore, it is important for businesses involved in crypto transactions to ensure that proper KYC measures are taken.
What Are The Benefits of Using KYC For Crypto Transactions?
Let's take a look at some of the benefits of using KYC for crypto transactions:
- Increased security – By verifying the identity of customers, businesses can reduce the risk of fraud and money laundering. This helps to ensure that customer funds are safe and secure, as well as preventing malicious actors from taking advantage of the system.
- Enhanced customer experience – KYC procedures help to create a smoother, more secure process for customers. This ensures that customers have a positive experience when using crypto transactions, as well as preventing any potential fraud or identity theft.
- Reduced risk – KYC helps businesses reduce the risk of being involved in illegal activities, as it allows them to verify the customer’s identity before any transactions take place.
- Improved compliance – AML regulations require businesses to take certain steps to help prevent financial crime. By implementing KYC procedures, businesses are better able to meet their compliance requirements.
- Improved trust – Customers can have greater trust in a business when they know that it is taking the necessary steps to protect their funds and identity. This helps to promote customer loyalty and build long-term relationships.
Is The Blockchain Secure Without KYC?
The blockchain is an immutable ledger, meaning that it is nearly impossible for anyone to alter or reverse a transaction once it has been written to the chain. However, this does not mean that there are no risks involved with using cryptocurrencies. Without KYC procedures in place, there is still a risk of malicious actors exploiting the system and attempting to launder money or steal identities. That’s why it is so important for businesses to use KYC when dealing with crypto transactions.
Is Crypto The Future?
Cryptocurrency is still a relatively young industry, and it’s uncertain whether it will become widely adopted in the future. But one thing is for certain: KYC procedures are essential for businesses involved in crypto transactions to ensure that their customers' funds and identities are safe.
See: Will Crypto Recover in 2023? Quite Possibly, and Here’s Why
By taking the necessary steps to implement KYC regulations, businesses can help protect themselves and their customers, as well as create a more secure crypto environment.
In conclusion
KYC is an important part of any cryptocurrency transaction. By implementing proper KYC procedures, businesses can reduce the risk of fraud or money laundering while also creating a smoother and safer experience for customers. This helps to promote customer trust and loyalty, while also ensuring compliance with AML regulations. With the right measures in place, businesses can help ensure that crypto transactions are secure and compliant.
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, 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
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BIS Publishes Report on Options to Address Crypto Risks: Ban, Contain, Regulate, Or?
Ledger Insights | Jan 12, 2023
Image: BIS
The Bank for International Settlements (BIS) published a brief paper exploring the options to address the risk of cryptocurrencies, or as it likes to call them, crypto-assets.
- Heightened Risks: It argues that cryptocurrencies feature many of the risks of TradFi, but while similar, the risks tend to be exaggerated. These include the extensive use of leverage, liquidity and maturity mismatches, and significant asymmetries in information.
- The BIS report highlights that DeFi often is not decentralized because founders have significant token stakes or others can acquire major influence.
- It also points to the critical roles of centralized cryptocurrency exchanges as crypto onramps.
- Another observation we have is that decentralized wallets increasingly enable direct onramps using credit cards which over time may partially erode the onramp role of exchanges.
See: BIS Limits Banks to Hold 1% of Reserves in Bitcoin –> “Banks Won’t HOLDL”
- The three direct routes to control crypto risks are to ban, contain, or regulate it.
- The BIS recognizes that banning it may not be acceptable for free societies. Also, bans can be circumvented and it could inhibit innovation.
- By containing crypto the BIS means ringfencing crypto, so the minimal overlap with TradFi is maintained.
- Regulate. A common approach is mapping crypto activities to conventional activities to apply the same risks and rules. But the mapping is not always straight forward. For example, some jurisdictions will regulate stablecoin issuers as banks, some as payment systems and others as banks. A second challenge is identifying the entity in a decentralized world.
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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, 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
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Coinbase is Cutting 950 Employees (20%) | Brother of Former Employee 10 months Sentence for Insider Trading
Reuters | Manya Saini and Niket Nishant | Jan 10, 2023
Image: Unsplash/Clay Banks
Coinbase Global Inc said on Tuesday it will cut about 950 jobs, or 20% of its workforce, as part of a restructuring plan that marks the third round of layoffs for the cryptocurrency exchange since last year.
- The company, whose shares were up 3.3% at $39.52, said it expects to incur about $149 million to $163 million in restructuring expenses.
- "The entire industry is going through a crisis of confidence and trading volume remains very weak. This job cut is a reflection of the current challenging environment," Oppenheimer analyst Owen Lau said.
- "This (job cuts) is a move that can help with near-term operating leverage," said Mizuho analyst Ryan Coyne, adding that it would not fix the underlying issue of rapidly deteriorating volumes. "It is going to require much more significant cost cutting to accommodate the current volume run rate."
See: Coinbase: $100m Fine to New York State Regulators for Longstanding Compliance Failures
Coinbase Chief Executive Brian Armstrong:
We also saw the fallout from unscrupulous actors in the industry, and there could still be further contagion. We will be shutting down several projects where we have a lower probability of success.
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Decrypt | Mat Di Salvo | Jan 10, 2023
A former Coinbase employee's brother has been sentenced for his role in a crypto insider trading scheme.
Coinbase Complies: Starting Apr 4 Monitor Canadian Transactions Above CA$1,000
- Prosecutors said last year that Ishan Wahi, while an employee at the San Francisco-based crypto exchange, allegedly provided information regarding upcoming token listings on Coinbase to his brother Nikhil Wahi, and his friend, Sameer Ramani.
- U.S. prosecutors have called this the first insider trading case involving cryptocurrency.
- It is alleged by U.S. authorities that $1.1 million was pocketed by the trio. The SEC also filed civil charges against the trio over the alleged scheme.
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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, 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
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Coinbase: $100m Fine to New York State Regulators for Longstanding Compliance Failures
AltFi | Amelia Isaacs | Jan 5, 2023
Image: Coinbase
The crypto exchange will pay a $50m fine and invest $50m (over the next 2 years) in its AML programme, which had “wide-ranging and longstanding failures”.
- According to the regulators, the crypto firm had let customers open accounts without sufficient background checks, and its failures made the platform vulnerable to “serious criminal conduct”, including “examples of fraud, possible money laundering, suspected child sexual abuse material-related activity, and potential narcotics trafficking”. Coinbase’s failure to keep up with its rate of growth meant that by late 2021 there was a growing backlog of more than 100,000 unreviewed transaction alerts.
- This caused the company to routinely fail timely investigate and report suspicious activity.
Coinbase Responds to New SEC Securities Listing Probe
Google Cloud to Let Users Pay With Crypto via Coinbase
Adrienne Harris, NYS Department of Financial Services Superintendent:
It is critical that all financial institutions safeguard their systems from bad actors, and the Department’s expectations with respect to consumer protection, cybersecurity, and anti-money laundering programs are just as stringent for cryptocurrency companies as they are for traditional financial services institutions. Coinbase failed to build and maintain a functional compliance program that could keep pace with its growth.
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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, 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
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Is USDCs Blockrock Money Fund a Back door CBDC?
Bank Policy Institute | Jan 4, 2023
Circle is shifting many of the assets backing its USDC stablecoin from direct holdings of Treasury securities to a government-only money market mutual fund created by BlackRock for Circle’s sole use, known as the Circle Reserve Fund.
- 80/20: The remaining 20 percent will remain bank deposits for the time being. More significantly, BlackRock in turn plans to apply for the fund to access the Fed’s overnight RRP facility. If access is granted, Circle plans to shift the remaining 20 percent into the fund, with the fund investing that cash into the ON RRP facility.
See: According to CBDCTracker, these Central Banks have Launched a CBDC or Pilot Initiative as of Today
- The ramifications here are difficult to overstate. In essence, anyone in the world wishing to hold the equivalent of reserves at the Federal Reserve will be able to do so by purchasing USDC.
- Especially in times of crisis, this asset would be highly desirable as a back-door CBDC or account at the Federal Reserve.
- It is a breathtaking example of regulatory arbitrage.
- It takes the fact that the Fed’s balance sheet is so large that it can no longer be funded with currency or bank reserves and combines it with a structure that avoids all federal oversight of Circle or limits on potential holders of the coins.
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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, 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
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Gemini and The Winklevoss Twins Are Facing a Big Mess
Fortune | Will Daniel | Jan 5, 2023
Image: Pixabay/geralt
Another victim of the Crypto Winter?
- Gemini exchange: In an interview with Fortune on the eve of Gemini’s launch, Tyler Winklevoss described how he hoped to lean into regulation in order to make cryptocurrencies accessible to retail investors, while also attracting the institutional crowd.
- The exchange grew quickly, barring a brief period of turbulence in the 2018 bear market, and the Winklevii became some of the first Bitcoin billionaires during Gemini’s rise.
- [Early 2021], the Winklevii had launched Gemini’s Earn platform. The crypto lending service offered juicy returns of “up to 7.4%” for depositing crypto, promising that customers could redeem their funds “at any time.” By comparison, the average savings account in the U.S. offers just a 0.2% return today.
- The problem for Gemini: One of the ways Gemini created these returns was through Genesis Global Capital, the lending arm of crypto investment firm Genesis Global Trading, which is owned by Silbert’s Digital Currency Group. Gemini lent users’ funds to Genesis, which in turn loaned them out to institutional borrowers.
- But when prices for cryptocurrencies tanked in 2022, it was a whole new world for Gemini and the Winklevii, and Gemini Earn users were particularly at risk. By June, Gemini was forced to slash 10% of its workforce. And just months later, reports surfaced that the firm would need to raise at least $1 billion to stave off bankruptcy for its Gemini Earn platform.
- The issue was made even worse when Genesis decided to stop issuing redemptions to clients such as Gemini after the collapse of FTX—which meant that Gemini didn’t have the money to pay returns or redeem funds on their Earn platform.
See: Overview of Some Popular Layer 1 Blockchains
- Letter to former friend: In an open letter to Silbert this week, Cameron Winklevoss said that over 340,000 users have more than $900 million in crypto trapped at Silbert’s Genesis Global Capital, and in total Silbert’s companies owe Gemini $1.675 billion. He argued that Silbert was engaging in “bad faith stall tactics” to avoid paying back customers.
- “The idea in your head that you can quietly hide in your ivory tower and that this will all just magically go away, or that this is someone else’s problem, is pure fantasy,” he wrote.
- Now, Gemini’s Earn users are suing Silbert and the Winklevoss twins, alleging that Silbert breached his contract by pausing redemptions, and the Winklevii sold interest-bearing accounts without properly registering them as securities. The Commodity Futures Trading Commission (CFTC) also filed a suit against the twins for misrepresenting the way their exchange and futures contracts operated back in 2017 when they sought regulatory approval.
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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, 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
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