Canada was one of the first countries to accept cryptocurrency and see its potential for both the economy and as a tech innovation. The governmental response was therefore pro-crypto from the start. At first, this meant that there was little regulation on the part of the Canadian government.
However, now that cryptocurrency is widely used in Canada, the media covering the industry reports that rules and regulations are becoming stricter. This provides a level of stability and security for the users, but there are some in the industry that oppose the changes.
New Bank Rules for Crypto Holders
The Office of the Superintendent of Financial Institutions (OSFI) is proposing changes to its capital and liquidity approach to crypto-assets. It will reflect an evolving risk environment and international developments.
In 2022 OSFI issued interim advisory regulations on the matter and the new rules will replace those once they take effect. They will detail four classifications of crypto-assets and the capital treatment for each.
“Deposit-taking institutions and insurers need clarity on how to treat crypto-asset exposures when it comes to capital and liquidity. We look forward to giving them this clarity through these new guidelines that reflect industry input and international standards.” said – Peter Routledge, Superintendent of Financial Institutions.
This move is part of an international effort to further regulate how banks invest in crypto and is somewhat modeled on a similar plan by the EU.
The EU Regulations
Canadian changes to the regulations regarding crypto banks come after the EU has made similar changes. These laws are often talked about as “prohibitive” by industry insiders.
The European regulations assign that “the maximum possible 1,250% risk weight to free-floating cryptocurrencies.”
In practice, this means that banks need to have a euro of capital in fiat currency for each euro they have in cryptocurrency. Experts agree that in general, this means that there will be fewer banks willing to invest in crypto. It’s a sign the EU is trying to prohibit the market. This is mostly likely due to the volatility that doesn’t suit traditional banking businesses.
Canadian Rules on Crypto Exchanges
Crypto exchanges are also facing a new set of regulations in Canada. The goal of the changes is to increase investor protection commitments. This is to be accomplished by setting up a pre-registration process.
The process will take 30 days and without it, the exchange can even begin to register to legally operate in Canada. Through it, the government imposes rules on the exchange. The main purpose of the rule is to segregate crypto assets held for local clients. It will also ban margin or other forms of leverage, as well as ban selling stablecoins without the CSA’s permission.
CSA Chair Stan Magidson, who also runs the Alberta Securities Commission, issued a statement. It clarifies that the recent insolvencies that hit other crypto trading platforms led to this change. The problems occurred on the platform based outside of Canada. The new regulations are a way to have more control over the issue.
What Will Change?
The exchanges now have thirty days to comply with the new rules. The main goal of the changes is for the exchanges to trade in other assets beyond crypto. This includes cash, securities, and foreign currencies.
Since many cryptocurrency exchanges work with crypto only, they can’t comply with the new rules, unless they change the whole business model. Chances are that this will lead some cryptocurrency exchanges to leave Canada, at least until the new regulations are sorted out.
The first major cryptocurrency exchange to respond to the new regulations so far is Binance, an exchange behind BNB coin. Since it’s a crypto exchange dedicated to crypto-only trading and doesn’t support the idea of mandatory registration, it will pull out of Canada. The exchange issued the following statement:
“We are confident that we will someday return to the market when Canadian users once again have the freedom to access a broader suite of digital assets.”
They’ve also tweeted:
“Unfortunately, (the) new guidance related to stablecoins and investor limits provided to crypto exchanges makes the Canada market no longer tenable for Binance at this time.”
The Changes in the Gambling Market
Canada is making changes in its rules and regulations when it comes to the gambling market, according to CCN and other media covering the industry. For years Canada has had strict laws regarding gambling on a national level. It was left to the states to decide on exceptions and some states did allow some forms of gambling.
Now, Canada is getting into the online gambling market, with a national plan on how to manage and legalize it. A new set of rules and regulations will also affect the part of the market that allows gambling using cryptocurrencies as a payment option. It’s a chance for Canada to regulate this market for the first time.
iGaming in Canada
iGaming is a government-regulated online gambling market set up by the Ontario government. The goal of the project is for the government to take charge of the online gambling and crypto-gambling market. Canadian players already use the services of crypto casinos based abroad.
Registering for iGaming also provides a betting establishment with a valid license in Canada. The licensing process has caused some controversies since it’s stricter than most other crypto-gambling sites.
The Problem with the New Regulations
The main issue the players and industry insiders are having with the new gambling regulations in Canada is about what’s required to register. The anti-money-laundering laws, and the “know your customer laws” are made to increase transparency. This means that the users of gambling sites in Canada may need to provide their names to the establishment.
One of the main attractions of using cryptocurrencies to bet is the fact that it allows for anonymous betting online. New and strict regulations limit that possibility and therefore are met with disappointment by the end users.
Shape of Things to Come
These changes in different sectors concerning the cryptocurrency market in Canada are part of a larger and even global trend. Cryptocurrencies are no longer a novelty. Instead, they are a widely accepted payment option and a branch of the financial industry.
This has led many governments all over the world to introduce stricter laws regarding cryptocurrencies. They are introducing transparency in how crypto is traded. On the one hand, such measures bring stability to the market. On the other, it’s a sign that things are changing and that crypto is now a part of the financial establishment.
To Sum Things Up
Canada and many other countries are introducing new regulations governing cryptocurrencies. This goes for crypto exchanges, online gambling in crypto casinos, and banks providing loans in crypto. All of the regulations are stricter than before and the industry is reacting to it. Some exchanges have already left Canada.
Changes such as these will continue now when crypto is more popular than before. The financial industry doesn’t accept volatility and risk and tries to minimize it. This means that crypto exchanges will have to adapt. Those who use crypto for betting will also have to accept that crypto casinos will become more similar to traditional ones.