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Crypto Regulations in Canada & U.S: Latest Updates and What You Should Know

The regulatory landscape for cryptocurrencies has been changing rapidly in the past few months. New regulations, along with old ones, have also come into force. In this article, we will be discussing the latest developments in the crypto regulations landscape in Canada and United States. The concerns around potential risks arising from investing in cryptocurrencies or token sales led to a tightening of the regulatory environment by several securities regulators in both the United States and Canada.

The Canadian Securities Administrators (CSA) published a notice on September 12 that outlines their views on how securities laws apply to businesses that deal in virtual currencies such as bitcoin and ether. And on September 25, the U.S Securities and Exchange Commission (SEC) announced that it will begin monitoring digital token sales to protect investors from risks involving unregistered securities.

Canada

Canada has been one of the most active jurisdictions in terms of regulating cryptocurrencies, digital tokens, and Initial Coin Offerings (ICOs). As early as 2013, the Canadian government published an analysis of the risks associated with cryptocurrencies. In the same year, Canada’s federal budget stated that the government will “develop options for the treatment of virtual currencies”.

In December 2017, the Canadian Securities Administrators (CSA) published a notice that explains how regulation of “securities offerings of investment contracts” applies to ICOs. The notice notes that “an investment contract exists when a person invests their money in a business and expects to earn a profit from the investment”. The CSA also clarified that an ICO falls under the definition of an ‘investment contract’. Therefore, the sale of cryptocurrencies or tokens cannot be done outside of the regulatory framework.

United States

The United States has also been proactive in regulating cryptocurrencies, digital tokens, and ICOs. However, there is a significant difference between the regulatory approaches taken by the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). As far as cryptocurrencies are concerned, the SEC is of the view that they are securities and therefore, they are subject to the Securities Act of 1933 and the Securities Exchange Act of 1934. The CFTC, on the other hand, believes that cryptocurrencies are commodities and are regulated by the Commodity Exchange Act of 1936.

Exchange-Traded Funds (ETF) Proposals

An ETF is a fund that owns the underlying assets (in this case cryptocurrencies) and divides ownership in the fund into shares. These shares are then listed and traded on a stock exchange. If an ETF has a good performance, it means that the value of the fund will increase and the shares will be worth more. A few exchanges have filed proposals to the SEC for the launch of ETFs that will invest in cryptocurrencies as well as tokens.

The Winklevoss twins, who are well known for their involvement in cryptocurrencies, have also applied for a Bitcoin ETF. Most of these proposals are still under consideration by the SEC. However, in August, the SEC rejected a proposal filed by the Winklevoss twins for a Bitcoin ETF. The SEC noted that the proposal was not consistent with the definition of ‘security’ as provided in the Securities Act of 1933 and the Exchange Act of 1934.

New Regulations for Exchanges and ICOs

There have been changes in regulations governing exchanges, which are the platforms on which cryptocurrencies are traded. Most of these exchanges have been registered as trading facilities or alternative trading systems (ATS) under the Securities Exchange Act of 1934. A trading facility is an entity that regularly facilitates the purchase or sale of securities or commodities, while an alternative trading system is an entity that facilitates the trade of securities or commodities in a manner that does not trigger a regulatory requirement.

In Canada, exchanges must now register as trading or commodity boards. In the U.S., exchanges must register with the CFTC as commodity trading advisors (CTAs) or derivatives clearing organizations (DCOs). Similarly, the SEC has proposed regulations for ICOs. These regulations would require ICOs to register with the SEC as an investment of securities.

Conclusion

The regulatory landscape for cryptocurrencies has been changing rapidly in the past few months. New regulations, along with old ones, have also come into force. In this article, we will be discussing the latest developments in the cryptocurrency regulations landscape in Canada and United States. The concerns around potential risks arising from investing in cryptocurrencies or token sales led to a tightening of the regulatory environment by several securities regulators in both the United States and Canada.

The Canadian Securities Administrators (CSA) published a notice on September 12 that outlines their views on how securities laws apply to businesses that deal in virtual currencies such as bitcoin and ether. And on September 25, the U.S Securities and Exchange Commission (SEC) announced that they will begin monitoring digital token sales to protect investors from risks involving unregistered securities.