Category Archives: Blockchain, Crypto, Digital Assets Regulations
Toronto’s Bitbuy first crypto marketplace to receive full OSC approval
Financial Post | | Dec 1, 2021
Bitbuy’s next step: bring more coins onto the regulated platform
Bitbuy’s next step: bring more coins onto the regulated platformToronto-based crypto company Bitbuy Technologies Inc. is set to announce Wednesday that it has received registration approval from the Ontario Securities Commission (OSC), making it the first registered marketplace that is also a brokerage of crypto assets.
Bitbuy was formed in 2013 as a trading platform before pivoting to become a marketplace in November 2019, merging the broker dealer business with a market infrastructure. Michael Arbus, Bitbuy’s chief executive officer, told the Financial Post that the marketplace element sets them apart from other Canadian crypto trading platforms that function solely as a brokerage or have crypto as a feature on a larger business model.
Arbus described that marketplace has buyers and sellers meeting and agreeing upon a trade. Once their prices match, the trade goes through. However, a broker would go through a third party when making the transaction.
See: CEBL Becomes The First Pro Sports League In North America To Offer Players Pay In Bitcoin Through Bitbuy
“(Consumers) never know about pricing or transparency. They have no control over the price that the other side is giving them,” Arbus said. “In our opinion, people deserve more. So, when we made a decision to go marketplace, it came with a few other big tasks as well.”
Since then, he said, they have grown from 25 people to 85. “It’s an extremely busy time for our platform,” he added.
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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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Cryptocurrency executives called to testify in Congress Dec 8
BBC | Dec 1, 2021
Executives of eight major cryptocurrency firms have been called to testify before a US congressional committee on 8 December.
Executives of eight major cryptocurrency firms have been called to testify before a US congressional committee on 8 December. Witnesses called to appear include Coinbase's Alesia Haas, Circle's Jeremy Allaire and Bitfury's Brian Brooks.
It will be the first time companies representing the controversial sector have been questioned in this way.
US politicians across the political spectrum have called for more scrutiny of crypto-currencies.
Elizabeth Warren on the left of the Democratic Party has called for tougher regulation of the sector and Donald Trump has described crypto-currencies as "a scam".
See: Federal Reserve Board, FDIC and OCC Agencies issue joint statement on crypto-asset policy initiative and next steps
Mr Brooks of Bitfury previously served as a top banking regulator under the Trump administration and had a role in policy-making around crypto-currencies.
Crypto-currencies are not currencies in the traditional sense, although they can sometimes be used to make payments. They are stored online in a "digital wallet" and act more like investment vehicles or securities, often with a high degree of volatility.
The anonymity of paying using crypto-currencies means they have been favoured for criminal activities such as drug dealing and ransomware attacks. However their supporters say the view that they are predominantly for circumventing the law is outdated and that innovation in this area offers huge potential.
Countries around the world have taken radically different approaches to crypto-currencies.
China has declared crypto-currency transactions illegal, a move India looks set to follow. Many other central banks are eyeing the sector warily and discussing regulation.
See: Moody’s says Crypto regulation a plus for banks, fintechs
However El Salvador recently declared Bitcoin - the most widely established crypto-currency - to be legal tender and its president plans to build a Bitcoin city at the base of a volcano, with the cryptocurrency used to fund the project.
Across the US, as well as many private citizens holding crypto-currencies, states and municipalities have begun toying with plans to integrate them into their operations.
The mayor of Miami and mayor elect of New York have ambitions to make their cities centres for cryptocurrency business.
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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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Crypto-tax primer in Canada
Investment Executive | Gail J. Cohen | Nov 25, 2021
Whether earnings from crypto are considered business income or a capital gain depends on the holder’s behaviour
Investing in cryptocurrencies is becoming more mainstream, particularly in Canada with its supportive regulatory environment for new and innovative financial products.
The Canada Revenue Agency generally treats cryptocurrencies as commodities, not currency (the same goes for the U.S. Internal Revenue Service). Therefore, “any income from transactions involving cryptocurrency is generally treated as business income or as a capital gain, depending on the circumstances,” the CRA states.
And when crypto is used to “pay” for goods and services, the CRA considers someone to be bartering, and “not reporting income from such transactions is illegal.”
See: Foreign property tax implications associated with owning cryptocurrencies
But the tax treatment of cryptocurrency is “an evolving situation,” said Mehran Sedigh, a CPA and managing partner at Triple M Professional Corp. in Richmond Hill, Ont. In his experience, crypto “was getting treated as a commodity, but now it is being treated as a liquid asset of some sorts,” he said.
Whether earnings from crypto are considered business income or a capital gain depends a lot on the holder’s behaviour, said Sedigh. For a long-term holder, crypto is more likely to be treated as a capital asset (and earnings as a capital gain). But if the holder actively trades crypto, then crypto is more likely to be considered active business inventory, with any earnings considered business income, Sedigh said.
Which events are taxable?
Owning cryptocurrency itself is not taxable. But, according to the CRA, there could be tax consequences for doing any of the following:
- selling or gifting cryptocurrency;
- trading or exchanging cryptocurrency, including disposing of one cryptocurrency to get another cryptocurrency;
- converting cryptocurrency to government-issued currency, such as Canadian dollars;
- using cryptocurrency to buy goods or services.
See: Liberals’ new bank surcharge tax on profits over $1 billion could be implemented by start of 2022
For example, say your client owes their accountant $50,000 and pays the accountant in Bitcoin. The client bought one coin when it was worth $30,000 and it’s now worth the full $50,000 of that accountant’s bill. “That $20,000 increase in value, from the time you purchased it to the time that you paid the bill with it, would be considered a gain,” Sedigh said.
The big question is whether that $20,000 gain is income or a capital gain.
The CRA would consider the gain to be business income if the activities the client engaged in “involve some regularity or a repetitive process over time.” Those activities could include cryptocurrency mining and trading, as well as creating and selling non-fungible tokens, Sedigh said.
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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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Bank of Canada Staff Paper: Bitcoin Adoption and Beliefs in Canada
Bank of Canada | Daniela Balutel, Christopher Henry, Jorge Vásquez, Marcel Voia | | Nov 30, 2021
In the last few years, the number of so-called cryptocurrencies—a form of electronic money that allows people to make direct person-to-person transactions—has surged, with more than 740 now available. Among them, Bitcoin enjoys the highest trading value and volume as well as significant mainstream media attention.
See: BIS Research: CBDCs beyond borders: results from a survey of central banks
Gaining insights into why more people are adopting cryptocurrencies is increasingly important. That’s because these currencies, if widely adopted, could affect both the banking sector and central bank’s core functions, such as monetary policy. We provide an analysis to better understand how three factors influence people’s decisions about Bitcoin adoption:
- network effects—as more people adopt and use Bitcoin, it becomes a more useful platform
- individual learning—whether beliefs about the future of Bitcoin influence a person’s present-day decision to use the currency
- social learning—how beliefs about Bitcoin are formed by those around us
See: Bank of Canada Speech: Money and Payments in the Digital Age
We find that both network effects and individual learning are important and increase the probability of adopting Bitcoin. In other words, a person will more likely own Bitcoin if they:
- belong to a larger network of Bitcoin users
- have more optimistic beliefs about Bitcoin’s future
We also find that peers’ beliefs are not currently a key factor behind Bitcoin adoption. This makes sense because Bitcoin adoption in Canada remains low (around 5 percent).
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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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Federal Reserve Board, FDIC and OCC Agencies issue joint statement on crypto-asset policy initiative and next steps
Federal Reserve Board of Governors | Nov 23, 2021
- Board of Governors of the Federal Reserve System
- Federal Deposit Insurance Corporation
- Office of the Comptroller of the Currency
Federal bank regulatory agencies today issued a statement summarizing their interagency "policy sprints" focused on crypto-assets and providing a roadmap of future work related to crypto-assets.
See: Hester Peirce Says SEC Enforcement is Not the Way to Provide Crypto Clarity
In particular, the statement describes the focus of the preliminary work conducted through the sprints undertaken by the agencies. It summarizes the agencies' plan to provide greater clarity throughout 2022 on whether certain crypto-related activities conducted by banking organizations are legally permissible, and related expectations for safety and soundness, consumer protection, and compliance with existing law and regulations.
The emerging crypto-asset sector presents potential opportunities and risks to banking organizations, their customers, and the overall financial system. The interagency sprints quickly advanced and built on agencies' combined knowledge, which helped identify and assess key issues related to potential crypto-asset activities conducted by banking organizations.
The statement from the agencies does not alter any existing agency rules or regulations.
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Download the 2 page PDF joint release statement --> here
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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IIROC Grants Fidelity Crypto Asset Trading Insurance and Custody Exemptions
IIROC | Nov 17, 2021
On August 13, 2021, the IIROC Board of Directors granted the following exemptions to Fidelity Clearing Canada (FCC), related to FCC’s intention to transact in crypto assets:
- An exemption to obtain Financial Institution Bond (FIB) insurance coverage, pursuant to Dealer Member Rule sections 17.5, 400.2, 400.3, 400.3B, 400.4, 400.5 and 400.6 (Insurance Exemption)
- An exemption to provide capital for crypto asset positions held at FCC’s custodian Fidelity Digital Asset Services, LLC (FDAS), pursuant to Line 20 of Statement B of Dealer Member Rule Form 1 (Custody Exemption).
Insurance Exemption
The IIROC Board of Directors granted an exemption from the general requirement to maintain adequate insurance in Dealer Member Rule section 17.5 and from the specific requirements in Dealer Member Rule sections 400.2, 400.3, 400.3B, 400.4, 400.5 and 400.6, and any successor IIROC requirements, to maintain sufficient FIB insurance coverage for all dealer business lines.
See:
Fidelity bites on bitcoin
Fidelity-backed crypto security startup Fireblocks launches ‘Secure Asset Transfer Network’
Custody Exemption
The IIROC Board of Directors also granted an exemption from the requirement for a Dealer Member to deduct 100% of the market value of the securities held in custody at a non-acceptable securities location in the calculation of risk adjusted capital as collectively set out in Line 20 of Statement B of Form 1 and the “Capital Requirements” paragraph (ii) of the related Notes and Instructions, and any successor IIROC requirements.
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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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The Infrastructure Investment and Jobs Act’s Attack on Crypto
Cato Institute | Nicholas Anthony | Nov 15, 2021
The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency Provisions
The Infrastructure Investment and Jobs Act’s Attack on Crypto: Questioning the Rationale for the Cryptocurrency ProvisionsThe Infrastructure Investment and Jobs Act has finally reached President Joe Biden’s desk and has been signed into law. However, its ratification, with the cryptocurrency provisions in Section 80603 intact, signals the beginning of an attack on the cryptocurrency industry. If Congress does not wish to see the cryptocurrency industry leave the country just as the United States is becoming a global leader in cryptocurrency mining, Congress should amend the provisions that have set a de facto ban on legal cryptocurrency mining and exposed over 60 million Americans to new felony crimes.1 Failure to do so will likely result in numerous legal challenges from the industry—especially if said provisions continue to rest on such a weak foundation.
The Amendments to Sections 6045(c)(1) and 6050I(d) of the Internal Revenue Code
The law addresses the cryptocurrency industry in Section 80603.6 It is here that two provisions amend the Internal Revenue Code (IRC) in a way that amounts to a de facto ban on legal cryptocurrency mining in the United States. Worse yet, it also requires an unjust level of surveillance that is enforced by threat of felony charges.7
See: As regulators circle above, how should the DeFi industry respond?
The amendment to 6045(c)(1), commonly referred to as the “broker provision,” redefines the term “broker” in the IRC so that it includes “any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”8 In doing so, Congress has categorized not just traditional exchanges (e.g., Coinbase, Kraken, etc., that are licensed and regulated at the state level) as brokers but also individual miners and even software developers. This provision thus requires exchanges, miners, and developers to report the name and address of each “customer.”9 Yet this is information that many who will be newly defined as brokers in the IRC simply do not have access to.
Therefore, by mandating that they report what they cannot possibly offer, Congress is effectively banning legal mining in the United States.
The amendment to Section 6050I(d) of the IRC might even be worse for the industry than the previous provision.10 Currently, Section 6050I(d) requires anyone engaged in a business transaction of $10,000 or more in cash to report the transaction to the IRS. The report must include the name and address of the payer, as well as their taxpayer identification number, the amount paid, the date, and the nature of the transaction. The law expands this requirement to also require reporting on business transactions involving $10,000 or more in digital assets.11
See: Cato: A Simple Proposal for Regulating Stablecoins
Failure to comply with Section 6050I(d) can result in severe repercussions. For example, if someone spends over $10,000 in cryptocurrency on a piece of art, the seller must file IRS Form 8300 within 15 days.12 Failure to file, incorrect information, or missing information may result in a $25,000 fine or five years in prison.13 Such a consequence should not be the result of any law that has not been properly debated or heard by the public.
Unjust Surveillance
The design of these provisions makes it difficult to understand what Congress is seeking to achieve. There’s a big difference between paying taxes on the income earned through mining (i.e., the coins one is rewarded with) and reporting the transactions that one mines. And there’s an even bigger difference between requiring those that “effectuate transfers” to report information and requiring any business that receives a payment to do so. So, while one might make a case for the cryptocurrency industry to pay its “fair share” of taxes, the amendments to Sections 6045(c)(1) and 6050I(d) are clearly designed for surveillance purposes.
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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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