Karsten Wenzlaff, Advisor
August 26th, 2025
Karsten Wenzlaff is a Crowdfunding and Fintech Expert from Germany. He is Secretary-General of Digit[...]
Category Archives: Regtech, Compliance, Governance
New US Crypto Tax Reporting Rules Starting 2025
Crypto | Jul 2, 2024
Image: Freepik/rawpixel.com
US Treasury Finalizes New Crypto Tax Reporting Rules for Exchanges and Payment Processors Starting in 2025
The US Treasury Department has finalized a comprehensive set of new cryptocurrency tax reporting guidelines that will take effect in 2025 (2026 tax filing season). These laws, aimed at increasing transparency and compliance, will have a substantial influence on cryptocurrency brokers, exchanges, and investors. They are also estimated to generate $28 billion in tax revenue over a decade.
See: CRA Pursues $54 million in Unpaid Crypto Taxes
Starting in 2025, bitcoin brokers, including exchanges and payment processors, will have to record user transactions to the IRS. A new tax form, Form 1099-DA, will be used to report gross profits, purchase dates, and sales prices. Furthermore, any transactions involving digital assets that exceed $10,000 must be recorded. Regulations for non-custodial brokers and decentralized exchanges have been deferred, with further information due later this year.
Treasury Makes Adjustments Based on Industry Concerns
The crypto industry has expressed concerns about the broad definition of 'brokers' triggering potential privacy issues, as well as the high compliance costs. This included nearly 44,000 comments made to reduce excessive restrictions on the impacted organizations. As a result of this feedback, the Treasury department altered the definition of broker such that "The final regulations require reporting by brokers who take possession of the digital assets being sold by their customers."
Danny Werfel, IRS Commissioner:
“These regulations are an important part of the larger effort on high-income individual tax compliance. We need to make sure digital assets are not used to hide taxable income, and these final regulations will improve detection of noncompliance in the high-risk space of digital assets. Our research and experience demonstrate that third-party reporting improves compliance. In addition, these regulations will provide taxpayers with much needed information, which will reduce burden and simplify the process of reporting their digital asset activity.”
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
Compared to Canada?
In Canada, bitcoin transactions are classified as capital gains or business income, and taxpayers must disclose all crypto transactions on standard tax forms. Unlike the United States, Canada does not require particular tax forms for bitcoin transactions, with a focus on individual taxpayer reporting rather than broker duties. For more information on Canadian regulations, visit the CRA Crypto Guidelines.
Closing
These improvements are intended to streamline the tax reporting process for cryptocurrency users and enable the IRS enforce tax compliance more efficiently. As the industry evolves, expect additional rules to change the landscape of digital asset taxes.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Competition Act Amendments and What It Means for Fintech
Regulation | Jun 25, 2024
Image: Freepik/Racool studio
Here's what fintechs need to know about major amendments to the Competition Act to boost fairness, protect consumers.
On June 20, 2024, Canada introduced and implemented important modifications to the Competition Act (See: release), taking a critical step toward improving market fairness and protecting consumers. These modifications are intended to solve modern market concerns, ensuring that enterprises compete on an equal playing field while protecting consumer interests. These developments have a significant impact on the fintech industry, which is known for its quick growth and innovation.
See: AI’s Impact on Competition: Bureau Calls for Insights
Matthew Boswell, Commissioner of Competition:
“These amendments are a key step in modernizing Canada’s competition law and give the Bureau more effective tools to protect and promote competition in Canada. A modern Competition Act is fundamental to driving lower prices and innovation while fueling economic growth. A more competitive economy will benefit all Canadians – by offering more choice and greater affordability for consumers and businesses.”
Key Changes and Impact
1. More Effective Merger Control
See: DoF Consultation: Financial Competition in Canada
- The modifications strengthen the Competition Bureau's authority to investigate and prosecute deals that may harm competition by establishing a presumption that a merger is anti-competitive if it significantly increases market concentration or share.
- If a large financial institution wants to buy a fast-growing fintech business, the Bureau will have an easier job challenging the merger if it significantly increases market concentration. For example, a planned merger between two major banks would be carefully evaluated to avoid hurting competition in the financial services industry.
2. Stronger Powers to Address Anti-Competitive Agreements
- The changes strengthen civil restrictions on anti-competitive agreements (up to 3 years old), and include monetary fines and restorative remedies.
See: Can Canada Harvest the Next Wave of Productivity Growth?
- Agreements between major banks and fintech companies that limit them from working with other financial institutions may be contested. The latest amendments may address circumstances in which a major bank has an exclusive agreement with a fintech company that sells blockchain technology, preventing the firm from providing services to other banks.
3. Enhanced Refusal to Deal Provision
- The changes widen the refusal to deal clause to cover circumstances where rejection has a significant impact on a company, while also guaranteeing that independent repair service providers have access to diagnostic or repair information.
- A fintech business that relies on data from a major bank to provide innovative financial services may dispute the bank's refusal to provide critical information. This enables fintech companies to collect critical information for developing competitive products and services.
4. Improvements to Deceptive Marketing Provisions
- The statute now requires firms to justify discount claims and prohibits omitting required costs from advertised prices unless enforced by the government.
See: RBC’s Climate Claims Being Investigated by Competition Bureau
- Fintech companies that offer financial services, such as loans or credit cards, must ensure that all fees are fully disclosed. Misleading techniques, such as concealing expenses in the fine print of digital contracts, would be outlawed under the new regulations. This influences how fintech companies market their products and services to customers.
5. Expanded Private Access to the Competition Tribunal
- Private parties can now directly challenge anti-competitive conduct, including as deceptive marketing and anti-competitive agreements, broadening who can petition the Tribunal and reducing the legal threshold for cases to continue.
- Small financial firms can directly challenge larger incumbents who engage in anti-competitive activity, such as exclusive contracts or exploitative pricing. This clause enables fintech companies to pursue legal action more easily, resulting in a more competitive market.
Conclusion
The June 20, 2024 amendments to the Competition Act are a major leap forward in Canada's ongoing efforts to create a competitive, fair, and transparent marketplace.
See: Canada’s Competition Problem: 7 Reasons
These measures, which streamline merger evaluations, increase fines, enhance transparency, strengthen consumer protection, and support SMEs, ensure that the Canadian market remains dynamic and fair for all participants, including the fintech industry.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Report: Responsible AI Insights and Tips for Investors
AI Report | Jun 21, 2024
Image: Responsible AI Playbook for Investors, (WEF and CPP)
Investor Insights from the WEF's Playbook on Responsible AI (RAI)
The "Responsible AI Playbook for Investors," published by the World Economic Forum, provides crucial guidelines for investors to navigate the ethical, legal, and social implications of AI investments. Investors should apply due diligence through a responsible AI framework or set of guidelines to avoid the most common AI challenges around lack of governance, data bias, explainability, privacy/security, and sustainability.
1. Effective Governance is the Bedrock of RAI
Investors must build strong governance mechanisms to assure responsibility across the AI lifecycle. This includes creating thorough rules that establish ethical standards and compliance requirements, guaranteeing board monitoring, and including diverse stakeholders in order to foster trust and uphold ethical norms. Governance frameworks that prioritize accountability and openness can help to reduce risks and build confidence among stakeholders.
2. Fairness and Inclusivity with Diverse Datasets and Routine Audits
AI systems must be developed to promote fairness and diversity, while also addressing potential biases in data collecting and algorithm design. Regular bias audits and increasing diversity across AI development teams are critical measures. The playbook emphasizes the need of inclusive AI, showcasing how technology can benefit excluded populations while ensuring equal outcomes. AI systems educated on diverse datasets and routinely evaluated for biases can cut discriminatory outcomes by half.
3. Transparency and Explainability Boosts Trust
Transparency and explainability are critical for building trust in AI systems. Investors should prioritize AI solutions that offer clear explanations of their decision-making processes. For example, Google's Explainable AI (XAI) initiative emphasizes the importance of making AI algorithms more interpretable, which improves user trust and system reliability. 65% of consumers are more likely to trust AI systems that provide clear and understandable explanations for their decisions.
4. Privacy and Security is Essential for Adoption
Protecting user privacy and data security are critical to responsible AI implementation. Implementing strong data protection rules and conducting frequent security assessments are crucial steps. Apple's use of differential privacy measures establishes a high standard for safeguarding user data while providing valuable insights. Data breaches cost businesses an average of $3.86 million each occurrence, emphasizing the necessity for strong security measures.
5. AI Solutions for Sustainability (and Social Impact)
AI has the potential to drive sustainability and positive social impact. Investors should support AI initiatives aligned with environmental and social goals. AI solutions in energy management can reduce carbon emissions by up to 20%, showcasing the technology's potential for significant environmental benefits. Responsible AI can significantly contribute to sustainability goals by reducing carbon emissions and improving resource efficiency.
Image: Freepik
Tips on Embracing Responsible AI
Asset managers frequently express doubts regarding RAI due to worries about disruption, additional costs, and perceived value. Here are some practical strategies for learning and embracing RAI:
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Tip 1: Balance Advocacy and Adaptability
Investors must find a balance between advocating for responsible AI practices and adapting to changing environments. This entails staying on top of regulatory developments while fostering effective self-governance structures that address stakeholder concerns proactively.
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Tip 2: Navigate Global Laws and Regulations
There is a need for clarity and certainty around prospective regulatory regimes and applications of the law. Investors and companies are looking for standards and frameworks to help them navigate this difficult market with confidence.
See: Responsible AI in Finance: CFTC’s New Framework
However, waiting for clarity is no reason to postpone the RAI journey. Companies and investment partners gain when investors communicate their minimum standards or limits.
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Tip 3: Understand the Intersection of RAI and ESG
While AI and RAI may become part of Environmental, Social, and Governance (ESG) standards, many investors regard these concepts as different. The politicization of ESG has hindered any potential association between the word and advancing Responsible AI. Regardless of label, AI is a developing business risk and potential that will determine the long-term viability of businesses.
See: Generative AI and Major Human Rights Fintech Risks
Boards should monitor the integration of RAI into management's strategic planning and operational execution, as well as require market disclosure where AI adoption, development, and application are significant.
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Tip 4: Address the Tension Between RAI and Corporate Imperatives
The tension between RAI and corporate imperatives, such as speed to market or short term profits. It is important that investors acknowledge this tension and explore ways to address it by shifting expectations around short- versus long-term value creation. Investors with certainty of capital, such as pensions, are better able to weather short-term volatility and take a long-term approach.
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Tip 5: Promote Continuous Learning and Adaptation
Asset owners may struggle to communicate their expectations to asset managers and organizations. Directors may lack the necessary skills to effectively manage AI risks and potential. Therefore, investing in education and capacity-building initiatives is essential to keep pace with AI advancements.
Outlook
Investors who emphasize RAI will not only reduce risks, but also open up new avenues for innovation and long-term value development.
See: Considerations for Evaluating AI Startups in 2023
By incorporating strong governance, maintaining transparency, fostering diversity, and adhering to privacy and security standards, investors may help design a future in which AI benefits all stakeholders.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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SEC Ends Ethereum 2.0 Probe with Non-Exoneration Clause
Enforcement | Jun 19, 2024
Image: SEC letter to Consensys, In the matter of Ethereum 2.0
SEC Ends Investigation into Consensys and Ethereum. Implications for the Crypto Industry
On Jun 18, 2024, Consensys announced that the United States Securities and Exchange Commission (SEC) has dropped its investigation into Ethereum 2.0 and will not take legal action over Ethereum. This is big win for the Ethereum community and will have implications for the future of cryptocurrency regulation in the United States.
Background
In 2018, the SEC when Jay Clayton was Chair and in public speeches SEC Director Bill Hinman expressed that Ether was not a security. However, when Gary Gensler, the current SEC Chair, took over, the regulatory attitude became clear as mud. In 2023, the SEC began looking into Ethereum 2.0, implying that it could be a security. Consensys received many subpoenas and a formal order of investigation on March 28, 2023. Consensys replied by launching a lawsuit in April 2024, arguing that Ethereum is a commodity and outside the SEC's authority.
SEC's Decision
On June 18, 2024, the SEC issued a letter to Consensys stating that it would not take enforcement action against Consensys or Ethereum 2.0.
- The letter officially closes the SEC's inquiry of Consensys and Ethereum 2.0, noting that based on the facts now available, the SEC will not propose enforcement action against Consensys Software Inc.
See: U.S. House passes FIT21 with Bipartisan Support
- The letter says that the conclusion of the study should not be interpreted as an exoneration of Consensys or its conduct. It implies that, while no action is advised at this time, future measures may be taken if additional evidence becomes available.
Implications
- The SEC's ruling confirms that Ethereum is a commodity, not a security, might set a precedent for other cryptocurrencies. This judgment coincides with previous SEC recommendations under former Chairman Jay Clayton, who stated that Ethereum was sufficiently decentralized and not regarded a security.
- The SEC's actions have been views as inconsistent, causing confusion and uncertainty in the market. The closure of this investigation boosts developer and investor confidence in the Ethereum ecosystem, will promote more innovation and investment. The price of Ether reacted favourably after the announcement.
See: Canada’s Proposed Mutual Fund Crypto Regulations 2024
- The non-exoneration clause highlights the SEC's continued caution and the provisional nature of their judgment, emphasizing the significance of Consensys and other crypto firms conforming to regulatory norms.
Conclusion
Moving ahead, regulators must work with industry stakeholders to create open and equitable policies that promote innovation while protecting investors. Addressing legal and regulatory ambiguity is crucial for creating a more stable and healthy crypto sector.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Key Findings from Bank Director’s 2024 Risk Report
Report | Jun 18, 2024
Image: 2024 Risk Survey, Bank Director report
Summary of 2024 Risk Survey for Financial Institutions and Insights for Fintechs
The Bank Director's 2024 Risk Survey highlights numerous rising risks and issues that banks and financial institutions are facing as a result of developing regulatory and economic situations. Below are some important areas of concern applicable to the financial sector for review
1. Regulatory and Compliance Risks
- Increased regulatory requirements are a major worry for financial organizations.
- Over 75% of executives are concerned about regulatory risks, compared to 66% last year.
- New restrictions and monitoring, like the Community Reinvestment Act, have significantly contributed to this worry.
2. Margin Pressures and Profitability
- Net interest margins (NIMs) have tightened dramatically, with 78% of bank leaders reporting lower profits, up from 26% the previous year.
- Rising funding costs are creating profitability issues, particularly for community banks. NIMs decreased by 10 basis points to 3.17%, putting pressure on profitability.
- The ratio of unprofitable community banks increased to 5.2% at the end of 2023, up from 3.5% the previous year.
3. Deposit Retention and Liquidity Management
- Rising interest rates have caused some deposit losses, with 59% of banks reporting low to moderate affects on their funding base.
- Banks raised deposit interest rates and borrowed from Federal Home Loan Banks to address liquidity risk concerns (76% increase).
4. Supervisory Exams and Compliance
- Following the Silicon Valley Bank bankruptcy, many banks underwent tighter regulatory inspections, indicating increasing supervisory caution.
5. Strategic Challenges and Risks
- 64% of directors and bankers see deposit pricing as the most important strategic problem for the next 18 months.
- Inflation, interest rate volatility, and geopolitical uncertainty continue to pose risks to the industry's credit quality, profits, and liquidity.
Image: Bank Director 2024 Survey, Risk Heatmap
Opportunities and Insights for Fintechs
- Fintechs should create strong and agile compliance frameworks to effectively traverse increased regulatory scrutiny.
- Given the tremendous pressures that traditional banks face, innovative solutions that optimize net interest margins may be useful.
- Strategies for increasing client loyalty and managing deposit retention in a high-interest environment are critical.
See: Climate Inflation Discussion for a Sustainable Future
- Providing improved liquidity management tools could help financial organizations reduce the risks associated with fluctuating interest rates.
- Implementing cutting-edge technologies for risk management, regulatory compliance, and operational efficiency can provide fintechs a competitive advantage.
Outlook
As regulatory pressures increase and economic conditions shift, financial institutions must improve risk management and operational efficiencies. This environment is a tremendous opportunity for fintechs to innovate and offer solutions to these crucial issues.
See: RBC and Rogers Cybersecure Catalyst Launch New Fintech Incubator
Fintechs can position themselves as important partners for banks navigating this challenging situation by focusing on compliance, customer retention, liquidity management, and the use of sophisticated technologies. Those who can respond quickly and strategically to emerging threats and opportunities will help define the financial sector's future.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Bank of Canada Publishes New Retail Payment Enforcement Policies
Payments Regulation | Jun 18, 2024
Image: Freepik
The Bank of Canada has announced new supervisory policies around enforcement
On June 17, 2024, the Bank of Canada implemented various new regulatory measures around enforcement aimed at improving oversight of payment service companies.
See: BoC Speech: Essence of the New Retail Payment Activities Act
These policies centre on:
- Administrative Monetary sanctions (AMPs): Implementing new penalties for noncompliance.
- Enforcement Process and instruments: Streamlining enforcement procedures and instruments.
- Public Notice of Decisions: Developing guidelines for providing public notices of enforcement actions.
- Governor's Review: Defining the process for examining the Governor's decisions.
- Executive Roles: Clarifying the roles and responsibilities of the Executive Director and the Managing Director.
- Significant Adverse Impact: Managing problems with considerable negative consequences.
They also updated their Glossary of Terms about retail payment supervision.
Resource: BoC Update for PSPs: New Registration Guide and Supervisory Policies Available
Review this comprehensive page hosted by the Bank of Canada around Retail Payments Supervision - Policies and Guidelines.
Conclusion
The introduction of these policies comes at an important time, as digital payments continue to expand fast. NCFA Canada emphasizes the importance of staying informed to ensure compliance in order to maintain the payment ecosystem's integrity.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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Terraform Labs’ $4.55 Billion SEC Settlement
Crypto Enforcement | Jun 13, 2024
Image: Pixabay/WilliamCho
Terraform Labs Settles SEC Fraud Case with $4.55 Billion Penalty
One of the biggest fines in SEC history, $4.55 billion, will be paid by Terraform Labs and its creator, Do Kwon, as part of a settlement with the Securities and Exchange Commission (SEC) on fraud charges.
- Do Kwon launched Terraform Labs, which created the stablecoin TerraUSD. The stablecoin crashed in May 2022, causing an estimated $40 billion in damages for investors.
- The SEC charged Terraform Labs with misrepresenting the dangers to investors and offering unregistered securities while making false claims regarding the stability of TerraUSD.
See: SEC Scrutinizes Terraform’s $166M Transfer to Dentons
- A $420 million civil punishment for Terraform and a $80 million civil fine for Do Kwon are included in the $4.55 billion settlement, along with $4.05 billion in disgorgement and interest.
- In accordance with the resolution, Terraform must also shut down operations and apply for approval of a Chapter 11 liquidation plan. A trustee will be chosen to oversee any residual assets and make payments to investors and creditors.
- The need for cryptocurrency companies to adhere to financial regulations, transparency and truthful portrayal of financial products and services to prevent deceiving investors are among the most important lessons learned.
Do Kwon, who was detained and found guilty in Montenegro in 2023 of trying to travel with a forged passport. Since then, officials in Montenegro have been debating with the institution over whether to extradite the disgraced former crypto mogul to South Korea or the United States.
Closing Outlook
As regulators around the world scrutinize digital assets, companies must prioritize compliance and transparency to foster a trustworthy market environment.
The National Crowdfunding & Fintech Association (NCFA Canada) is a financial innovation ecosystem that provides education, market intelligence, industry stewardship, networking and funding opportunities and services to thousands of community members and works closely with industry, government, partners and affiliates to create a vibrant and innovative fintech and funding industry in Canada. Decentralized and distributed, NCFA is engaged with global stakeholders and helps incubate projects and investment in fintech, alternative finance, crowdfunding, peer-to-peer finance, payments, digital assets and tokens, artificial intelligence, blockchain, cryptocurrency, regtech, and insurtech sectors. Join Canada's Fintech & Funding Community today FREE! Or become a contributing member and get perks. For more information, please visit: www.ncfacanada.org
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