[This article originally appeared in the October issue of Payments and Fintech Lawyer (Vol. 12:10)]
In Canada, as in other jurisdictions, the approach regulators are taking to the cryptocurrency environment has been highly criticized for being slow to adapt. As with any new and emerging technology there is a learning curve, and once industry and private enterprise figure out the best way to capitalize on it, there are inevitably casualties in the general public, in the form of investors and obsolete industries. Once complaints begin to emerge and private lawsuits abound, regulators take notice, take comments from the public, and then resolve to take action. Until the burden of policy creation lands in the laps of legislators, who will shovel it off to internal government policy advisors to determine how best to mitigate public complaints and maximize votes in the next election, the regulators are saddled with the burden of adapting the existing enforcement regime to the new world order.
It is safe to say that we approached that point in the blockchain and cryptocurrency space not too long ago. In late 2017, regulators began to crack down on the most egregious and blatantly fraudulent token generation events, otherwise (and perhaps erroneously) known as Initial Coin Offerings or “ICOs”. In Canada the relevant regulators can be broken down into three categories: securities, tax, and anti-money laundering. All three have sought to identify and understand the risks of the new technology in an unconcerted effort, resulting in a patchwork of proposed and existing regulations that are frantically being interpreted by commentators and regulators as opposed to judges. To call this a gray area is an understatement. It is more like limbo, where even the definition of money itself has become ambiguous.
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