Cryptocurrency has been a hot topic for a few years now, and its relevance in the global economy cannot be overstated. Many countries are looking to digital currencies as the way forward, and Canada is not left out.
Recently, there have been two impactful events that could shape the future of cryptocurrencies in Canada – Binance’s exit and the Bank of Canada’s digital loonie discussions. In this post, we will explore these events and how they can influence the country’s cryptocurrency market.
Binance’s Exit from Ontario
Binance, one of the world’s largest cryptocurrency exchanges, recently announced its exit from Ontario, Canada. The company cited regulatory concerns as the reason for this move. Ontario’s securities regulator, the Ontario Securities Commission (OSC), recently introduced new rules for cryptocurrency exchanges to operate in the province. The rules require cryptocurrency exchanges to register with the OSC and comply with a set of regulations.
While this move by the OSC is aimed at protecting investors’ interests, it has also made it tough for some cryptocurrency exchanges to operate in the province. Binance’s exit could be a significant blow to the province’s cryptocurrency ecosystem as the exchange was a significant player in the market.
The Bank of Canada’s Digital Loonie Discussions
In contrast to Binance’s exit, the Bank of Canada’s discussions on the digital loonie could be a significant positive for the country’s cryptocurrency market. The digital loonie is a digital version of the Canadian dollar that is being considered by the Bank of Canada. The central bank is exploring the pros and cons of going the digital currency route and seeking feedback from Canadians.
The digital loonie could have many benefits, including promoting financial inclusion, reducing the cost of transactions, and strengthening the country’s monetary policy. However, the Bank of Canada has also noted that it would be cautious in its approach to a digital currency, considering how it could impact the financial system’s stability.
What Does These Events Mean for Canadian Crypto?
Binance’s exit and the Bank of Canada’s discussions on the digital loonie could have significant implications for the Canadian cryptocurrency market. Here are some potential effects:
1. Impact on Cryptocurrency Adoption
Binance’s exit could lead to a reduction in the number of cryptocurrency exchanges operating in Canada, limiting customers’ options. This could lead to fewer people accessing cryptocurrencies, negatively affecting cryptocurrency adoption in the country.
On the other hand, the Bank of Canada’s discussions on a digital loonie could lead to an increase in cryptocurrency adoption. As a digital currency issued by a central bank, the digital loonie would have more credibility than most cryptocurrencies in the market. It would give Canadians a trusted and easy to access alternative to traditional banking services.
2. Impact on Cryptocurrency Regulation
Binance’s exit highlights the importance of regulatory clarity for the cryptocurrency industry. The OSC introduced regulations aimed at protecting investors’ interests, but it has also made it challenging for some cryptocurrency exchanges to operate in the province. Regulators will need to strike a balance in crafting regulations that protect investors but do not stifle innovation in the cryptocurrency industry.
The Bank of Canada’s discussions on the digital loonie could pave the way for a national regulatory framework for cryptocurrencies in the country. The central bank’s involvement could lead to a more coordinated approach to regulating cryptocurrencies, providing clarity to market participants.
3. Impact on Canadian Cryptocurrency Companies
Binance’s exit could hurt some Canadian cryptocurrency companies that had relationships with the exchange. The companies could lose their access to Binance’s large customer base and range of cryptocurrencies. However, these companies could pivot and seek out other cryptocurrency exchanges to partner with or focus on serving other markets.
The Bank of Canada’s discussions on the digital loonie could create opportunities for Canadian cryptocurrency companies. If the country decides to issue a digital currency, it could lead to the development of a thriving ecosystem around the digital loonie. This ecosystem could include companies developing digital wallets and payment solutions tailored for the digital loonie.
Binance’s exit from Ontario and the Bank of Canada’s discussion on the digital loonie are two events that could shape the future of cryptocurrencies in Canada. While Binance’s exit is a negative development for the country’s cryptocurrency ecosystem, the Bank of Canada’s discussions on a digital loonie could lead to an increase in adoption and a more coordinated regulatory framework. As the country considers its approach to cryptocurrencies, it will need to balance innovation with investor protection and avoid stifling growth in this emerging industry.
The Canadian cryptocurrency landscape remains in flux, even in the midst of a crypto winter. On May 12, Binance, the world’s largest crypto exchange, announced that it was pulling out of Canada due to new regulations put in place by the Canadian Securities Administrators. This decision came just days after the Bank of Canada revealed that it was looking into creating a purely digital version of the Canadian dollar. So what do these moves mean for Canadians and the crypto industry as a whole?
Binance’s Decision to Leave
Binance, which was founded by Canadian Changpeng Zhao, has had a rocky relationship with regulators in the country for a few years. After tangling with the Ontario Securities Commission (OSC) which required crypto platforms to register in order to operate, Binance incorporated in Alberta in January 2022. However, after regulators across the country followed the OSC’s lead and required crypto platforms to register in December 2022, Binance decided to pull out of Canada, citing disagreement with some of the new rules, particularly those that placed limits on investors using crypto exchanges and related to stablecoins. While not ruling out a return to Canada entirely, Binance said it would come back only if and “when Canadian users once again have the freedom to access a broader suite of digital assets.”
Canada’s Strict Regulations
Canada, especially Ontario, was an early adopter of rules for crypto exchanges. The OSC took a hard line on crypto after the 2019 collapse of QuadrigaCX, which owed $215 million to its 76,000 Canadian crypto clients. Canada’s largest provincial securities watchdog subsequently tangled with foreign crypto platforms, including Binance and FTX Inc. Another exchange, KuCoin, was hit with a permanent market ban and $2 million in monetary penalties in June of 2022 after OSC staff accused the firm of operating an unregistered crypto asset trading platform and allowing Ontario investors to trade securities without a prospectus or exemption. Then, after FTX collapsed spectacularly in November of 2022 and its former CEO Sam Bankman-Fried was charged with fraud, the rest of Canada’s provincial regulators fell in line with the OSC’s position. As a group, under the umbrella Canadian Securities Administrators, they require registration and have laid out even more rules for crypto exchanges.
Remaining Crypto Trading Platforms in Canada
Regulators have authorized 11 crypto trading platforms so far, including Bitbuy Technologies Inc., Bitvo Inc., Coinberry Ltd., Coinsquare Capital Markets Ltd., Fidelity Clearing Canada ULC, Fidelity Digital Assets Services, Netcoins Inc., Newton Crypto Ltd, Simply Digital Technologies Inc. (CoinSmart), VirgoCX, and Wealthsimple Digital Assets Inc. Coinbase, the largest crypto exchange in the United States, says it signed a pre-registration undertaking with Canadian regulators on March 24 and is committed to working with Canadian regulators to comply with a regime that “protects consumers while embracing innovation.” Kraken, another large San Francisco-based crypto exchange, is also understood to be working with Canadian regulators with an eye to becoming authorized to do business with Canadians.
Bank of Canada Considering Digital Currencies
The Bank of Canada is considering the creation of digital versions of their traditional paper and coin currencies. The Bank of Canada isn’t convinced it’s a good idea to shift to a digital dollar right now, but wants to know what Canadians think through a consultation running until June 19, 2023. Central bankers have expressed the need to keep up with digital innovations and to ensure fiat currencies aren’t squeezed out of future economies if digital currencies are adopted at scale.
What Comes Next for Crypto in Canada?
Platforms that are willing to register with regulators across the country, including signing pre-registration undertakings before they are even given the nod by the OSC or Alberta Securities Commission, will be able to operate. But they will have to comply with a raft of added rules to ensure safe custody of crypto assets and the segregation of customer assets from those held or managed by the platforms. They may also have to comply with existing rules for securities that aren’t traditionally associated with cryptocurrencies, such as derivatives.