Category Archives: Blockchain, Crypto, ICO Regulations

Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT

Finextra | Oct 8, 2019

Switzerland - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLTThe Swiss National Bank (SNB) is working with the Bank for International Settlements (BIS) on an innovation hub in Switzerland that will initially focus on research into digital central bank money and distributed ledger technology.

The SNB is working with SIX on the research, embarking on a proof of concept to explore how digital central bank money could be used in the settlement of tokenized assets between market participants.

The project is making use of the SIX Digital Exchange (SDX) platform, which is currently being built and promises to be the world's first end-to-end exchange for digital assets when it launches next year offering listing, trading, settlement and custody service.

See:  Mark Carney’s Trojan Unicorn — Are Central Banks Considering Stealth Nationalization in Sovereign Digital Currencies?

The SDX system will be used to explore technical possibilities for integrating digital central bank money into DLT platforms. Options include the connection of the existing Swiss Interbank Clearing System or the issue of digital Swiss franc tokens by the SNB for financial market participants.

Jos Dijsselhof, CEO, SIX, says: "We are pleased to contribute to this initiative and, through SIX Digital Exchange, to explore the technological possibilities with which the SNB could support token-based financial ecosystems in the future by providing digital central bank money for financial market participants."

The new innovation hub will also work on a second research project, looking into the rise in requirements placed on central banks to be able to effectively track and monitor fast-paced, automated electronic markets.

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Facebook faces EU grilling over Libra ‘cryptocurrency’ after losing PayPal backing

TNW Hard Fork | Yessi Bello Perez | Oct 7, 2019

Facebook Libra and EU committee - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLTAs Facebook deals with the loss of PayPal‘s backing for its ‘cryptocurrency‘ Libra, the tech giant must now get ready to answer EU regulators’ questions about the potential risks posed by the project.

The European Commission has requested that Facebook and the Libra Association – the body tasked with supervising the digital currency – answer questions relating to financial stability, money laundering, and data privacy risks.

According to the Financial Times, which saw the commission’s questionnaire last week, this is all part of EU financial commissioner Valdis Dombrovskis’ efforts to asses whether projects such as Libra should be regulated in the EU, if new regulation is required, or whether the ‘cryptocurrency‘ should be allowed to operate at all.

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The news couldn’t come at a worse time for Facebook, which has faced increasing scrutiny and opposition from regulators in recent months.

Just last month, Libra‘s founders were subject to questioning by 26 central bank officials in what was the first encounter between the technology giant and regulators.

Prior to that, in August, Brussels’ antitrust body raised concerns about Libra potentially causing competition restrictions.

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Toronto Centre Podcast: Industry and Regulatory Perspectives of the Distributed Ledger Technology ASX Implementation

The Toronto Centre | Podcast | Sep 28, 2019

torontocentre podast - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT

In this podcast, Ilana Singer, Chair of the Securities Advisory Board, Toronto Centre interviews Katie McDermott General Manager for Equity Post-Trade Services, Australian Securities Exchange.

In this podcast, Ilana Singer, Chair of the Securities Advisory Board, Toronto Centre interviews Oliver Harvey, Chief Supervisory Officer, Australian Securities and Investments Commission (ASIC).

 

 

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Waterloo-based Kik shuts down signature app, lays off staff amid cryptocurrency legal battle

Financial Post | James McLeod | Sep 24, 2019

kik chat app - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT'While we are ready to take on the SEC in court, we underestimated the tactics they would employ,' CEO Ted Livingston said Monday, vowing the fight will continue

Waterloo-based Kik Interactive Inc. is shutting down its signature chat app and laying off most of its staff in order to focus on a legal battle with the U.S. Securities and Exchange Commission, the company’s chief executive officer said in a blog post Monday.

Ted Livingston said he was reducing the number of employees from more than 100 to 19.

The U.S. regulator has sued the company, alleging that it conducted an unregulated sale of securities when it raised around US$100 million in 2017 through an initial coin offering for its nascent cryptocurrency, Kin.

“We are all in. And despite these hard decisions my confidence in Kin only continues to grow,” Livingston said in his post. “Together we will show the power of the Kin Ecosystem. Together we will get millions of people to buy Kin to use it. And together we will build a new economy that offers equal opportunity to billions of people. Together we will win.”

Kik Messenger launched in 2010 and quickly established a sizeable user base, and according to recent court filings the service still has “millions” of active users. The company was reportedly valued at US$1 billion when it received a US$50 million investment from Chinese tech giant Tencent.

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However, Kik struggled to generate revenue with the app, which competed with larger rivals such as Facebook Messenger and WhatsApp. In 2017, Livingston announced a plan to launch the Kin, and essentially use the Kik user base as the launchpad to spur widespread adoption of the digital currency.

In a legal complaint earlier this year, the SEC alleged that by tying the success of the cryptocurrency to Kik’s business success, the company was effectively using the initial coin offering to sell cryptocurrency as a security without proper regulatory compliance.

In August, the company filed a blistering response, alleging that the SEC was misrepresenting key facts and taking quotes from executives out of context to create a false picture.

On Monday, Livingston again took aim at the SEC, saying that the legal fight was a major factor in the decision to shut down the Kik Messenger app.

“So with the SEC working to characterize almost all cryptocurrencies as securities we made the decision to step forward and fight,” he said.

“While we are ready to take on the SEC in court, we underestimated the tactics they would employ. How they would take our quotes out of context to manipulate the public to view us as bad actors. How they would pressure exchanges not to list Kin. And how they would draw out a long and expensive process to drain our resources.”

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Regulating financial innovation – going behind the scenes

FCA | Sep 11, 2019

Christopher Woolard2 - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLTSpeech by Christopher Woolard, Executive Director of Strategy and Competition at the FCA, delivered at the Cambridge Centre for Alternative Finance annual conference, Judge Business School.

Highlights:

  • The UK has led the rest of the world with developments like the regulatory Sandbox, we are very proud of what has been achieved through it.
  • Early engagement is incredibly valuable for monitoring, supervisory and policy purposes. Working with innovative firms helps us achieve a better bird’s-eye view, enhancing our understanding when the overall landscape is blurry and ­changing quickly.
  • 'Stablecoin' is a term that has been widely adopted by industry, but we do not take it to be a distinct category of cryptoassets. Something labelled as a 'stablecoin' could sit within or outside of our regulatory perimeter.

Note: this is the speech as drafted and may differ from the delivered version.

See:  FCA confirms new rules for P2P platforms


Last month, Facebook announced its plans for Libra, the stablecoin it is planning to launch in conjunction with a number of payment and tech firms.

As has been widely reported, along with other regulators and central banks, we have been discussing their plans with Facebook.

If this comes to fruition, Libra could be very significant indeed.  It will pose questions for us as a regulator. It will pose questions for our colleagues at the Bank of England. It will pose questions for us working with our international partners. Moreover, its size and scale will pose questions for society and government more generally about what is acceptable and desirable in this space.

Historically, this may have been a sector that has lived by the mantra of ‘move fast and break things’, but the issues raised here require deep thought and detail.

In the UK, we’ve tried to manage some of those tensions through initiatives such as our regulatory Sandbox. We believe that has worked well, but we are facing now issues that could have a fundamental effect on the financial services system.

As a result, we need to ensure that innovation works in the interests of consumers. To do that, we need to thoroughly understand the business models firms are suggesting and how they benefit consumers.

We need to consider whether consumers understand and actively consent to the trade-offs inherent in those business models.  And we need to consider the wider impact on market integrity and stability.

So, I thought it would be helpful to peel back the curtain a little on how we look to critically analyse different cryptoassets and why, ultimately, we don’t think labels such as ’stablecoin’ are very helpful.

See:  FCA: Regulating innovation: a global enterprise

Now, I have to stress, what I’m about to say applies to all cryptoassets. I’m not talking specifically about Facebook or any one firm, but the rest of my comments should be taken as illustrative of the kinds of challenges we are facing up to as regulators.

What are ‘stablecoins’?

Market participants use ’stablecoin‘ as a broad term, which encompasses a variety of different types of cryptoassets. In essence, stablecoins hope to be less volatile than other cryptoassets and, so the argument goes, be more appropriate for a variety of use cases.

Back in October 2018, the FCA published a joint report alongside the Bank of England and HM Treasury as part of a domestic Cryptoassets Taskforce. In brief, we categorised cryptoassets into 3 broad types:

  1. Exchange tokens. Often referred to as ’cryptocurrencies‘, cryptoassets, such as Bitcoin, Litecoin and equivalents, utilise a distributed ledger technology (DLT) platform and are not issued or backed by a central bank or other central authority. They do not provide the types of rights or access provided by security or utility tokens, but are used as a means of exchange or for investment purposes.
  2. Security tokens are tokens, which amount to a ‘specified investment’. These may provide rights such as ownership, repayment of a specific sum of money, or entitlement to a share in future profits. They may also be transferable securities or another type of financial instrument under the EU’s Markets in Financial Instruments Directive II (MiFID II).
  3. Utility tokens are tokens, which can be redeemed for access to a specific product or service that is typically provided using a DLT platform. I mention this framework as it is important context. Just as the term ’cryptoasset‘ can mean different types of token, so can the term ’stablecoin‘.

Let’s take an example. ’Stablecoin‘ could refer to a cryptoasset backed by fiat currency. In certain cases, a fiat-collateralised cryptoasset could constitute e-money if it meets the definition provided in the Electronic Money (e-money) Regulations.

a 'stablecoin' could fall within or between any of the regulatory categories I’ve described previously. This makes us question how useful this one term – 'stablecoin' – is when it comes to labelling all these different tokens.

See:  Regular investors are cut out of a major financial market and the SEC chief wants to change that

If a cryptoasset is e-money then the issuer needs to be authorised as an e-money issuer and needs to comply with all relevant requirements under the E-Money and Payment Services Regulations.

It could be illegal to do otherwise.  We have already authorised e-money firms that use DLT, including graduates of the regulatory Sandbox.

But the term ’stablecoin‘ could equally apply to algorithmically controlled tokens. Or those backed by ’real world‘ assets such as securities or, indeed, other cryptoassets.

Such ’stablecoins‘ would need to be evaluated on their characteristics, but could amount to regulated products, including, for example, collective investment schemes.

However, to keep things short and simple, a ’stablecoin‘ could fall within or between any of the regulatory categories I’ve described previously. This makes us question how useful this one term – ’stablecoin‘ – is when it comes to labelling all these different tokens.

’Non-stable non-coins‘?

This issue isn’t specific to stablecoins. We tend to avoid the term ’cryptocurrency‘, as they generally don’t meet(link is external) the core economic criteria of money – as a unit of account, store of value and efficient means of exchange. We prefer to say ’cryptoasset‘, as it is more neutral and captures the broader range of tokens that are not just designed to act as a means of exchange.

So, whilst ’stablecoin‘ is a term that has been widely adopted by industry, we do not take it to be a distinct category of cryptoassets.

See:  Stablecoins: Experience the Stability

Something labelled as a ’stablecoin‘ could sit within or outside of our regulatory perimeter. Depending on its structure it could be many things – for instance, a derivative, a unit in a collective investment scheme, another kind of security or e-money.

We also question whether tokens governed by algorithms or underpinned by other cryptoassets are necessarily ’stable‘.

Volatility and stability are important concepts, but they are relative in nature. Whilst a wobbly tripod is seldom a good thing in the world of wildlife photography, ’volatility‘ in financial services is completely context-dependent.

The FCA does not have criteria, nor a legal basis, for endorsing such claims for cryptoassets.

Asking the right questions

Instead, when faced with novelty, we try to gain a crisper view. We ask:

  • What is this thing, why is there a new term and what problem is it trying to address?
  • Who is it for – wholesale banks or retail consumers? Is it within our regulatory scope or outside?
  • Is this really an innovation or just something old in a new, flashy wrapper?
  • Is this potentially to the benefit of consumers and competitive markets or is it likely causing harm by increasing complexity and other risks?

In short, we seek to consider any cryptoasset, including those labelled ’stablecoin‘, on a case-by-case basis and we encourage both consumers and firms to do likewise.

See:  UK and World Economic Forum to lead regulation revolution to foster industries of the future

This analysis is particularly important when identifying whether a specific cryptoasset sits within our regulatory perimeter or outside of it. Our recent perimeter guidance consultation on cryptoassets provides more detailed clarity for firms – we’ll be publishing a feedback statement on this shortly.

Something labelled as a 'stablecoin' could sit within or outside of our regulatory perimeter. Depending on its structure it could be many things – for instance, a derivative, a unit in a collective investment scheme, another kind of security or e-money.

As we seek answers to those questions, we expect any would-be cryptoasset issuer to be asking a few of their own before launching a product:

  • Is my product a beneficial innovation for consumers and markets? Or does it include hidden bugs and unmitigated risks?
  • Am I prepared to be open and cooperative with domestic and international regulatory agencies? How do I approach issues like anti-money laundering?
  • Will the target market I have in mind for this cryptoasset be able to make an informed and balanced judgement of the risks and benefits of investing in or using such an asset?
  • Finally, and most importantly, have I completed the regulatory, legal and technical due diligence in advance of launching a new product or service?

In financial services it is vital that innovators get it right the first time round.

See:  Canada’s Regulatory System for Fintech is Complex, Costly and Chaotic. It is Stifling Fintech Innovation

When it comes to other people’s money, or safeguarding against terrorist financing, corner cutting is simply not an option.

For those who think the model is to try it in beta for a few million people and see what happens, there may be activities here that are illegal without authorisation in many countries, not just the UK.

The UK has led the rest of the world with developments like the regulatory Sandbox, we are very proud of what has been achieved through it.

One thing that unites those who have been through the Sandbox is the professionalism and preparation shown by the firms involved, who all recognise there is a finite amount of learning through failing fast that can be tolerated when consumers are at risk of harm.

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Libra: France opposes the development of Facebook’s currency “on European soil”

Le Monde with AFP | Sep 12, 2019

Bruno Le Maire Minister Finance of France vows to block facebooks libra - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT

Bruno Le Maire expressed his hostility towards this cryptocurrency project, saying that "the monetary sovereignty of states is at stake"

Finance Minister Bruno Le Maire announced on Thursday (September 12th) that France was refusing to authorize the development "on European soil" of libra, the cryptocurrency that Facebook wants to launch in 2020.

"Considerable financial disorder"

"The monetary sovereignty of states is at stake," said the minister at the opening of a conference of the Organization for Economic Co-operation and Development (OECD) dedicated to the challenges of cryptocurrencies - without specifying, however, what concrete measures he wanted engage to prevent the spread of libra in Europe.

See:  Facebook’s Libra Cryptocurrency: Everything We Know

In his speech, Bruno Lemaire described as "systemic" the risks that could result from this "possible privatization of a currency (...) held by a single actor that has more than 2 billion users on the planet" . "Any failure in the functioning of this currency, in the management of its reserves, could create considerable financial disorders , " justified the Mayor, also fearing that the libra is replacing the national currency in the States where the currency is weak or has a strong devaluation.

Moreover, the minister added, "I do not see why we have been paying so much attention for years to avoiding the use of money for money laundering and the fight against the financing of terrorism, and that a currency digital as libra would escape these obligations . " "I want to say it with great clarity: in these circumstances, we can not allow the development of libra on European soil," he concluded.

Concerns of States

Facebook announced in June its intention to launch the cryptocurrency libra in 2020 - which must be managed by a foundation bringing together multiple actors and companies from Switzerland. The company has not yet unveiled all the details of the project, but has already explained that the libras could be purchased online with any type of currency, but also in cash in physical outlets - there will be no need bank account to own one.

Facebook wants to facilitate the transfer of money between two people through this currency, which will also be used to buy goods and services. The company promises instant, low-cost transactions and ensures that the currency will not be volatile, as it will be backed by a reserve of relatively stable currencies and values, such as dollars and euros.

See: 

The project has sparked a number of questions and concerns, with the power of Facebook being unparalleled - the social network has more than 2 billion active users, but the company also has the ultra-popular WhatsApp and Instagram apps. The G7 finance ministers announced in July their intention to "act quickly" . "We can not accept that an instrument of exchange is put in place while it respects none of the prudential rules that we impose on all sovereign currencies , " said the Mayor.

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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Regular investors are cut out of a major financial market and the SEC chief wants to change that

CNBC | Bob Pisani | Sep 10, 2019

SEC jay clayton - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLTKey Points

  • The head of the SEC says more needs to be done to make it easier for companies to go public.
  • Jay Clayton says his office is taking a “fresh look” at allowing Main Street investors access to the private capital markets.

The head of the SEC says more needs to be done to make it easier for companies to go public and that his office is taking a “fresh look” at allowing Main Street investors access to the private capital markets.

In a speech to the Economic Club of New York on Monday, SEC Chairman Jay Clayton said the lack of more IPOs and the inability of most of the Main Street investing public to access private markets was a “growing concern.”

Clayton addressed what he called the “two segments” in capital markets: the public markets, and private ones, including private equity and venture capital investments.

See:  The Solution To The Fintech IPO Shortage

“Twenty-five years ago, the public markets dominated the private markets in virtually every measure,” he said. “Today, in many measures, the private markets outpace the public markets, including in aggregate size.”

Clayton wants to make the public capital markets (IPOs) more attractive for companies, and expand opportunities for Main Street investors to participate in the private markets. The SEC, Clayton says, is making efforts to modernize financial disclosure rules and to recognize that one size does not fit all, permitting what he calls “scaled disclosures.”

He expressed concern that the Main Street investor for the most part does not have access to private markets, noting that the cost of including individual investors in private offerings is “high.”

Clayton said he wants to take a “fresh look” at initiatives to expand access to the private markets while at the same time providing “appropriate investor protections.”

Clayton addressed several other issues in his speech, in the follow-up Q & A, and in a separate interview on CNBC:

See: 

Bitcoin ETF

Clayton said that “progress has been made” on one of the SEC’s core concerns: how custody is handled. On another core concern — that most pricing of bitcoin occurs on foreign exchanges that are subject to manipulation, Clayton noted that those exchanges “do not provide the same level of protection as our U.S. equity market,” implying that manipulation of prices was still a major concern.

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NCFA Jan 2018 resize - Swiss National Bank and BIS use innovation hub to explore digital central bank money and DLT 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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