Category Archives: Blockchain, Crypto, Digital Assets Regulations
Are millions of NFT gamers in for an unpleasant surprise this tax season?
Protocol | Hirsh Chitkara | Nov 6, 2021
NFT games are fun but filing taxes afterward is a nightmare.
NFT games are fun but filing taxes afterward is a nightmare.In a matter of months, NFT gaming became a multibillion-dollar industry by combining two things people already loved: video games and getting rich from crypto. But it turns out the play-to-earn model also has the incredibly inconvenient side effect of turning even minor actions taken in a video game into taxable events.
See: Licensed Formula 1 Ethereum Game is Shutting Down – What Happens to NFT holders?
Did you sell your cute digital creature on Axie Infinity? That's a taxable event. Did you sell it less than a year after you bought it? (The answer is almost certainly "yes," given the timing of the play-to-earn boom.) Well, then it's a short-term capital gain. If you converted your NFT into a cryptocurrency before cashing out, that counts as two separate investment transactions. Even seemingly trivial in-game item swaps can have tax implications.
Making matters worse, NFT games don't typically keep track of all your transactions for tax documentation purposes. So while there are plenty of services designed to assist with crypto tax filings, it can be difficult to get the raw data that feeds into those products. By contrast, mainstream crypto-trading platforms like Coinbase prepare customer trade data for tax services either in the form of CSVs or direct software integrations.
See: Crypto-tax primer in Canada
Kim also pointed to the added complexity that comes with the "scholarship" model employed within play-to-earn gaming. While the name suggests an altruistic support system, scholarships are all about making money, and if that's your goal then consider a gaming option like slotsfans.com. Thousands of "scholars'' in places like the Philippines and Venezuela play games on behalf of NFT owners ("managers") in exchange for a share of the resultant earnings.
Scholarship managers therefore operate business partnerships within NFT games. That triggers business tax requirements rather than capital gains. It also likely adds overseas tax implications, since many managers live in developed nations and lend to scholars in developing nations. By some estimates, around 40% of players on Axie Infinity are now based in the Philippines.
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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 Complies: Starting Apr 4 Monitor Canadian Transactions Above CA$1,000
Crypto Briefing | Mike Dalton | Mar 25, 2022
Rules Reflect Regulatory Change
Coinbase users in Canada will soon be required to report the details of recipients who receive large transactions, according to a notice sent to users.
Those regulations, which came into effect in June 2021, require money services businesses to keep records of virtual currency transactions that amount to $1,000 or more. Coinbase’s decision to announce the rule this week is likely due to the fact that the Canadian authority FINTRAC will begin assessing compliance in April.
See: Snapshot: the regulatory framework for financial services compliance in Canada
According to Coinbase, these changes are being made in response to an anti-money laundering law called the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA).
“Starting on April 4, Coinbase will introduce some changes required by Canadian regulations,” the notice reads.
A copy of the message sent to customers was obtained by Ryan Sean Adams of Bankless, who shared it on Twitter.
See: CSA and IIROC Publish Guidance and Regulatory Framework for Crypto Asset Trading Platform Compliance
Canada has become a topic of discussion within the crypto community of late. In February, the Canadian government attracted attention when it ordered exchanges to block addresses connected with the convoy protesting COVID-19 restrictions.
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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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A New Frontier: Decentralized Insurance
Mayer / Brown | Joseph C., Yevgeniy M., Elliott S. | Mar 15, 2022
The volume of transactions that take place in the DeFi space is massive and is continuing to grow exponentially, as measured by the overall value of cryptocurrency assets deposited in DeFi protocols (i.e., “total value locked” or “TVL”). Given the growth experienced by the DeFi market, it is not surprising that DeFi users have sought to take advantage of risk allocation devices similar to those used in other markets and industries.
One such risk allocation device is insurance. Given the fact that DeFi is—by its nature—decentralized and its users are accustomed to decentralized financial products, it makes sense that insurance solutions provided to DeFi users would likewise have decentralized characteristics. Indeed, we have seen a number of providers established recently in the emerging decentralized insurance space for the purpose of offering decentralized insurance solutions. However, insurance coverage of events that affect the DeFi ecosystem (e.g., cybersecurity coverage for DeFi exchanges) need not be decentralized—which provides ample opportunity for existing providers of such insurance coverage to expand their current offerings into the DeFi market.
See: InsurAce Founder at DeFi Insurance Protocol Explains the Difference between Traditional and Decentralized Insurance
In either case, insurance providers will need to ensure that their operations are in compliance with the insurance regulatory framework in the United States, which is complex and nuanced. These nuances will be familiar to current insurance industry participants but may not be as obvious to new entrants to the market, such as decentralized insurance providers.
Each US state has its own code of insurance laws and its own insurance regulatory authority that enforces and monitors compliance with those laws. This means that offering an insurance product on a nationwide basis in the United States—regardless of whether the insurance product is decentralized or not—requires an operating model that is compliant with the insurance laws of over 50 US states and other jurisdictions. Some considerations that are important in structuring an insurance provider’s operations—including providers of coverage to DeFi—include the following:
Licensable Activities: These licensing requirements may be applicable to the decentralized insurance provider itself or to its partners or investors. For example, if a decentralized insurance provider has organized a decentralized autonomous organization (DAO) whose members have the authority to vote on whether a particular insurance claim should be paid, state insurance regulators might take the position that these voting rights permit DAO members to adjust or settle claims and therefore require them to be licensed as independent adjusters. As another example, a third party engaged by a decentralized insurance provider to market its products may be considered by state insurance regulators to be selling, soliciting or negotiating insurance—activities that typically require the person performing them to be licensed as an insurance producer.
See: OECD Report: Why DeFi Matters and Policy Implications
Rebates and Inducements. Most US states have enacted insurance laws prohibiting insurance companies, insurance agents, insurance brokers and other licensees from paying any rebate of an insurance premium to an insured or providing any special advantage or favor to any insured that is not specified in the insurance policy. These laws would typically prohibit a decentralized insurance provider from, for example, offering lower insurance premium rates to holders of its DeFi token or to the members of its DAO or from offering free or discounted products or services (such as token “airdrops”) to its insureds or to applicants for its insurance products.
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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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Ukrainian President, Zelensky, Signs the ‘On Virtual Currency” Bill Legalizing Bitcoin
Bitcoin Magazine | Shawn Amick | Mar 16, 2022
- The President of Ukraine signed the “On Virtual Currency” bill into law on March 16, 2022.
- The document outlines regulatory agencies, fines for violations, and investor protections allowing an open cryptocurrency market.
- The law was passed by parliament in September, to later be vetoed by President Zelensky as he expressed concerns of funding for a new regulatory agency, and the now amended bill addresses these issues.
President Volodymyr Zelensky of Ukraine has officially signed into law the structure upon which Ukraine will build bitcoin and other cryptocurrency markets, legalizing the emerging market in a way that is “bringing the crypto sector out of the shadows,” according to a translated press release from the Ministry and Committee for Digital Transformation of Ukraine.
bringing the crypto sector out of the shadows
Deputy Prime Minister of Digital Transformation, Mykhailo Fedorov in the official release on February 17, the day Ukrainian parliament passed the law with 270 votes in favor. “There will appear a transparent mechanism for investing in a new asset class," the minister continued.
See: Following Russia’s Invasion: Ukraine Suspends The Use of Electronic Money
The tumultuous dialectic between regulatory capacity and assignment of regulatory bodies no-doubt became pressured as increasing amounts of bitcoin and other cryptocurrencies flooded in to support military efforts to help fight against Russia's invasion. As the Ukrainian government took to social media asking for donations, they addressed their incapability of accepting bitcoin or other cryptocurrencies as donations that came direct to the government.
The signing of this law signifies Ukraine’s first step towards an open cryptocurrency market and away from their rocky path to legalization.
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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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Binance agrees to end operations in Ontario; OSC Publishes Binance’s Undertaking Statement
OSC | March 17. 2022 | Last Updated: Oct 28, 2026
TORONTO – The Ontario Securities Commission (OSC) today published an undertaking given by Binance Holdings Limited and Binance Canada Capital Markets Inc. (together, Binance), which holds these entities accountable for taking steps to address concerns arising from recent events.
In 2021, Binance publicly announced its intention to withdraw its services from Ontario. However, on December 29, 2021, Binance falsely notified investors that it was allowed to continue its operations in Ontario. These events resulted in the OSC issuing an announcement on December 30, 2021 to confirm that no entity in the Binance group of companies holds any form of securities registration in Ontario. This continues to be the case.
See: Binance hires ex-regulators and incorporates in Alberta to charter compliance course in Canada
Further, Binance subsequently confirmed to OSC Staff and advised Ontario investors that trading restrictions were in place for Ontario accounts on the Binance platform, whereas at the time Ontario investors were in fact able to continue to trade.
In the undertaking, Binance confirms that activities involving Ontario residents have ceased, apart from certain permitted actions to protect investors. Additionally, Binance commits that it will continue to prevent any activities involving Ontario residents, apart from these permitted actions, and to provide fee waivers and offer fee reimbursements to certain Ontario users.
Binance undertakes to maintain these restrictions until further notice to Binance by the OSC.
This undertaking represents a legally enforceable commitment by Binance to the OSC. The OSC reserves the right to take enforcement action against Binance for any past, present or future breaches of Ontario securities law not arising from the events described in the undertaking.
Oct 28, 2026 Update: The Ontario undertaking became an important part of the regulatory dispute that later reached the Supreme Court of Canada. See Binance Left Canada but the Fight Reached Supreme Court for the full timeline and current implications.
On March 29, 2021, the OSC communicated to crypto asset trading platforms that they must contact Staff to initiate the registration process, or face enforcement action. The OSC continues to work with firms (for which it is Principal Regulator) that initiated compliance discussions with Staff to assess the appropriate path to registration in Ontario.
See: OSC to Binance Investors ‘Not So Fast’: Binance Canada Receives License to Operate as Money Service Business
To date, six crypto asset trading platforms are registered in Ontario. These platforms are listed on the Registered Crypto Asset Trading Platforms page on the OSC’s website.
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Bloomberg | Mar 17, 2022
The Ontario Securities Commission says cryptocurrency exchange Binance has agreed to stop facilitating trades for Ontario account holders, after making similar promises last year but continuing to operate in the country.
The new promise was made in an undertaking with the regulator on Wednesday and is legally enforceable.
The OSC says Binance was still allowing Ontario investors to continue to trade and had advertised the service was still available in tweets.
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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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Emergencies Act Post-Mortem: Crypto execs in Ottawa discuss Digital Assets
FP via Community Press | | Mar 15, 2022
Canadian cryptocurrency executives said they froze only a small number of accounts as a result of the Emergencies Act and that the crypto industry’s transparency should encourage the government to engage more deeply with the sector during testimony before the House finance committee on Monday.
The hearing was part of a post-mortem on the Act and other measures aimed at tamping down the trucker convoy protests across the country. During this time, the Royal Canadian Mounted Police provided a list of crypto wallets thought to be connected to the protests ordering exchanges not to facilitate transactions for these accounts.
See: Canadian cryptocurrency exchanges ordered to cease dealings with convoy-linked accounts
Dustin Walper, chief executive officer at Canadian crypto trading platform Newton Crypto Ltd., told the committee that his firm was ordered by the RCMP to prevent the flow of funds to illicit bitcoin addresses, but had no ability to freeze or hold funds in private wallets not on Newton’s platform.
Walper said in his opening remarks:
“While (cash and crypto assets) can be and frequently are seized as part of a court order, a criminal investigation, a civil suit or what have you, they cannot be arbitrarily frozen without due process once they’re in the control of an individual. So, I would really urge the committee to think strongly about the kind of country you want Canada to be,” Walper added. “In my view, it’s a country that both strongly values property rights and due process, regardless of the inconvenience this may cause to legitimate investigation, one that embraces fintech innovation and pro-growth policies, and one that’s fair and even-handed even to those who we might not ultimately agree with.”
See: Carolyn Wilkins: to achieve benefits, crypto must be made as safe as Canada’s financial system
“We believe this strengthens the case for the federal government to start engaging with the domestic crypto sector to develop a clear and positive regulatory framework for crypto in Canada,” Wiley said. “It is strategically important to Canadian innovation, competitiveness and security that we have a strong domestic crypto industry.”
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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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BoC and MIT announce joint CBDC collaboration
Bank of Canada | Release | March 16, 2022
The Bank of Canada and the Massachusetts Institute of Technology (MIT) today announced an agreement to collaborate on a twelve-month research project on Central Bank Digital Currency (CBDC). The Bank will work with the MIT Media Lab’s Digital Currency Initiative team to explore how advanced technologies could affect the potential design of a CBDC, building on the DCI’s ongoing research into CBDC. This exploration will help inform the Bank of Canada’s research effort into CBDC.
See: Latest from BIS and a group of 7 central banks including Canada on retail CBDCs
The project forms part of the Bank’s wider research and development agenda on digital currencies and fintech. It will focus on exploring and experimenting with potential technology approaches to determine how a CBDC could work. No decision has been made on whether to introduce a CBDC in Canada.
The Bank of Canada will provide an update on the findings and outcomes at the end of the project period.
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Ledger Insights | March 16, 2022
Today the Bank of Canada announced it will work with the Massachusetts Institute of Technology (MIT) for its central bank digital currency (CBDC) research. The twelve month project is with the MIT Media Lab Digital Currency Initiative (DCI), the same group that is working with the Federal Reserve Bank of Boston on Project Hamilton.
As with Project Hamilton, the focus is on experimenting with different technical approaches. And the Bank of Canada emphasized that it has not yet made a decision about issuing a CBDC.
See: Bank of Canada Staff Paper: Bitcoin Adoption and Beliefs in Canada
Previously the central bank has cited the launch of a U.S. digital dollar as a possible trigger for Canada to launch its own because of concerns that Canadians might start to use U.S. dollars to a greater extent. President Biden’s digital assets executive order set a concrete timeline for a U.S. CBDC report and legislative agenda, effectively accelerating the United States’ research efforts.
The Bank of Canada has been exploring CBDC for several years. A year ago, it ran a university competition and published the winning three papers.
For its part, MIT’s DCI has a particular approach. For several years the DCI has contributed code to Bitcoin core, and it looks to leverage some of the benefits of cryptocurrencies in its CBDC work. However, in Project Hamilton, the decision was not to use a blockchain for speed benefits, but it uses the same unspent transaction output (UTXO) that Bitcoin uses. MIT also releases all its work as open source.
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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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