The Crypto Landscape Today
The Canadian cryptocurrency market is currently one of the most advanced in the world, despite crypto still only being regarded as an emerging technology.
The Canadian government has proactively participated in formulating regulations to govern the market’s operations and protect its investing citizens. As a result, it appears that the future of cryptocurrency in Canada is bright, among both investors and miners.
The country is spearheading the ascent of cryptocurrencies in both domestic and foreign assets. As a result, Canada became the first country globally to pass a law on digital currencies, which inevitably made a real statement in the cryptocurrency space.
As cryptocurrency prices fluctuate and are expected to rise over the coming months, many more Canadians are looking to buy and invest in Bitcoin through platforms such as MyBTC.ca.
According to Statista, Bitcoin is still by far the leading cryptocurrency for Canadians to invest in with Ethereum, Ripple, and Litecon some way behind. Bitcoin is also more widely accepted in Canada, with all the big cities accepting cryptocurrency to some capacity in exchange for goods and services.
The Canadian cities that notably appear more crypto-friendly are Vancouver, Toronto, and Ottawa with a wide range of businesses accepting cryptocurrencies in each of these cities. In their role as regulators, the Canadian government remains optimistic about crypto and actively invests in research projects for leveraging the technology.
Conducive Environment for Crypto
Canada, unlike most countries, generally has a friendlier approach with certain policies towards crypto. Its policies encourage individuals to participate in crypto-related activities and these have been a key driver for Canada’s innovation in the crypto sector.
Rather than let crypto become the wild wild west, Canada’s active involvement in the sector brings a sense of orderliness to this fast-expanding industry. While other countries outrightly outlaw or impose strict regulations against crypto operations, Canada’s friendlier stance makes the country stand out from the crowd internationally in a unique way.
Primarily, cryptocurrencies are regulated as securities, with the regulators striving to protect the public. The Canadian Securities Administrators (CSA) frequently issue directives on cryptocurrency operations across Canada. In one of the latest notices, CSA and the Investment Industry Regulatory Organization of Canada (IIROC) outlined the steps for crypto-asset trading platforms (CTPs) to comply with relevant regulations.
The Ontario Securities Commission (OSC) also partners with fintech firms to ensure all digital asset innovations remain compliant with the country’s regulations. In a recent case, the OSC went on an offensive against cryptocurrency exchanges that allegedly failed to comply with securities law. This onslaught saw Binance Exchange exit the Ontario market.
Canada’s Crypto Regulatory Framework
Surprisingly, not many countries have been as quick and proactive as Canada in setting up regulatory frameworks for the crypto sector. For many investors, regulating cryptocurrency operations is critical as the technology it features favors its use in facilitating illegal or malicious financial transactions.
Some crypto proponents and developers detest an overly regulated sector that may hurt crypto adoption and innovation in the industry. Striking a balance between both situations is a significant step for Canada in ensuring a thriving and secure crypto environment. So, how is Canada working towards this goal?
Canada passed the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) in 2014 (later amended in 2019) to set up a framework for handling virtual currencies. This act treats entities dealing with cryptocurrencies as money service businesses (MSBs). Like MSBs dealing with fiat currencies, crypto MSBs are subject to keeping records, verifying procedures, and reporting suspicious transactions. The MSBs must also register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC).
This legislation adds a layer of security to the crypto environment in Canada by pushing out non-compliant operators from the market. Consequently, investors are less likely to fall victim to illicit activities prevalent in crypto markets. What’s more, a confident public will invest more in crypto and drive adoption and crypto use cases. This new industry, which is speculative, has the potential to grow and have crypto as a competing store of value against existing methods for storing value.
Bank of Canada’s Position
The COVID-19 pandemic saw an uptake of cryptocurrencies and this triggered the Bank of Canada to accelerate its work on a CBDC. Despite a skeptic attitude towards cryptocurrencies, in an address, the bank’s deputy governor regards stablecoins as having a higher potential for adoption. In creating its CBDC, the bank has stated that it considers the environmental impacts to ensure the currencies operate with excellent energy efficiency.
The bank has also called out risks associated with stablecoins, stating that if widely adopted, they could disrupt the bank’s monetary policy mechanisms. So, the bank prefers that stablecoins in the Canadian crypto market be backed by the Canadian dollar. Considering the Bank of Canada’s position and the potential of crypto to render such institutions obsolete, it’s rather stern stance on cryptocurrencies is expected. However, unlike many other central banks worldwide, the bank’s stance is more welcoming.
Bitcoin ETFs and other ETFs
A cryptocurrency exchange-traded fund (ETF) is a type of security that tracks or mimics the price of a digital currency and can be traded on a stock exchange.
Most mainstream investors experience difficulty investing in crypto, which goes through multiple security procedures and crypto exchanges to hold the cryptocurrencies. Therefore, an ETF simplifies cryptocurrency trading for investors. Canada became the first country to launch a Bitcoin ETF in North America with OSC’s approval of Purpose Bitcoin ETF (BTCC) at the start of 2021. The ETF is traded on the Toronto Stock Exchange (TSX). Others include Evolve Bitcoin ETF (EBIT) and CI Galaxy Bitcoin ETF (BTCX), all trading on TSX.
Apart from BTC ETFs, Canada also has ETFs for Etheruem’s Ether (ETH). ETH ETFs, like BTC, increase investors’ exposure to ETH. The top ETH ETFs are issued by Purpose Investments, CI Global Asset Management, and Evolve. The presence of ETFs for Canadians illustrates the strides taken by Canadian regulators in embracing the sector.
Big NFT Market Player
The top-performing product in the blockchain sector this year is the non-fungible token, or NFT. These unique digital collectibles have expanded the possibilities for blockchain applications in distributing physical or digital items like artwork or music.
One of the top NFT collections during the NFT craze was the NBA Top Shot. The collection comprises tokenized video highlights of memorable moments from NBA games. The NFT studio behind NBA Top Shot is Vancouver-based Dapper Labs. The studio is also the creator of CryptoKitties, the virtual cat collectibles that sparked the first NFT craze back in 2017.
The NFT space has gained significant input from Canada’s innovative developers. This innovation can be attributed partly to the comparably favorable environment for crypto in the country.
Canada’s Cryptocurrency Mining
The latest fall in crypto prices this year has been partly due to concerns about the environmental impact of cryptocurrency mining. China previously accounted for the largest portion of Bitcoin mining worldwide, but the country has recently started to crack down on miners which has impacted the overall crypto price.
The majority of these miners are now looking for new locations to set up shop. In North American, Canada is a top destination for cryptocurrency mining firms as more miners look to relocate to a country in North America that is more crypto-friendly.
Canada boasts less-hostile policies, affordable power rates, and a favorable climate. Since the mining hardware requires constant cooling, Canada’s cool weather slightly eases the cooling energy consumption.
During the crackdown, Canada’s BTC mining firms have experienced a jump in their overall output. Publicly traded BTC mining firm, Bitfarms, reported a 50% jump in BTC mined in one month alone. Bitfarms deploys hydroelectric power for its mining activities, which makes up 99% renewable energy for its operations. As the push for sustainability in the crypto sector continues, Bitfarms’ output will likely increase throughout the year.
Canada’s commitment to sustainability has seen the government invest in renewable energy sources. This will be a product in high demand by many cryptocurrency mining companies in the future.
Learning from the Not So Perfect
Canada’s crypto sector hasn’t been all perfect and the industry has had to learn from harsh past experiences.
One such event was when Canadian crypto exchange QuadrigaCX’s founder Gerald Cotten reportedly died in India. The death resulted in a US $190 million loss of users’ assets as Cotten had kept the assets in a cold (offline) storage, and only he knew the keys. A similar case was with Einstein Exchange, where users reported they could not access their assets, worth millions of dollars.
Both cases occurred in the same year and led to tighter measures to protect users against similar events in the future. Regulators have put up stricter policies, cracking down on non-compliant firms.
Canada’s crypto market has evolved since then, with exchanges deploying multi-sig wallets to prevent QuadrigaCX-like losses. In June 2021, OSC listed one of the world’s top five exchanges by trading volume, Bybit, as operating an unregistered crypto asset trading platform.
The Future of Crypto in Canada
The crypto landscape in Canada has a bright future given the more structured regulations regarding the sector’s operations.
Canada’s innovation in the industry has put it up among the top-performing environments for the crypto sectors worldwide. The crypto industry is still emerging, and regulatory frameworks must constantly adapt favorably to the market needs if Canada is to remain a top crypto destination.
The future impact of 5G in Canada will likely be transformative for crypto too. The execution of 5G will increase styles of administration influencing how mining is assembled and what Defi applications can be developed.
At the moment, ensuring the sustainability of cryptocurrency operations is among the top issues Canada will have to handle. As challenges evolve, Canada’s swift response will come in handy to establish a solid future for crypto in the country.