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6.58 Rather Enabling Environment
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Canada is one of the most important countries for the development of the global blockchain industry, one of the global concentration centers of mining in particular. The Canadian dollar is among the ten most traded national currencies for cryptocurrencies. Canada is also regarded as a country with a liberal approach to regulating cryptocurrencies and projects based on the distributed ledger technology.
In 2014, the Parliament of Canada passed an act (An Act to Implement Certain Provisions of the Budget Tabled in Parliament on February 11, 2014 and Other Measures ("Bill C-31") which is considered the world's first legislative act to regulate the turnover of virtual currencies and the application of the requirements of legislation on money laundering and terrorism financing to transactions with virtual currencies. At the same time, this act has not yet entered into force since the relevant by-laws (the so-called "Regulations") have not been approved. This moment has for a long time been creating a legal vacuum of regulation and uncertainty for business, but the Regulations were developed in 2018 and will come into force throughout the year.
Blockchain and cryptocurrency issues are subjects of interests and support programs of the Canadian government, as well as the governments of Canada's provinces. Some strategic government documents contain direct references to distributed ledger technologies. Canada and the USA share generally similar approaches to regulating ICOs, the Canadian approach turns out to be much more liberal.
Rather Enabling Political Environment
Canada boasts enabling political environment for blockchain and cryptocurrencies. The major political actors stay rather positive about the development of the distributed ledger technology, exercising a lenient policy in regulation.
The country has the rather high level of political institutions consensus concerning the importance of supporting the development of distributed ledger technologies and cryptocurrencies. And this consensus is positive. The political environment is stable and enabling for the development of businesses associated with blockchain and cryptocurrencies.
Rather not Enabling Legal Environment
Regulatory Convergence Canada has no comprehensive legislation specifically designed to regulate the field of blockchain and cryptocurrencies. Various state authorities regulate individual legal relations involving blockchain and cryptocurrencies. Some issues are regulated inconsistently or ambiguously (there are different approaches in defining the legal status of token).
Definiteness of Legal Regulation The legal relations with regard to blockchain and cryptocurrency in Canada are regulated either by special provisions of the law (a smaller portion) or by analogy (most of them). In relation to the latter, Canadian regulators, with some minor exceptions, provide guidelines on what norms of the Canadian legislation are applied in various situations in relation to cryptocurrencies and blockchain (purchase and exchange cryptocurrencies for fiat currencies, use as means of payment etc.)
Virtual currencies are subject to Canada's tax regulations. The Canadian Securities Administrators (CSA) published CSA Staff Notice on Cryptocurrency Offerings in August 2017, which details the position of the regulator with regards to the application of securities legislation to ICOs. As well the CSA invited fintech businesses to cooperate within the framework of the CSA Regulatory Sandbox.
Stability of Legal Regulation The process of adopting new regulations concerning Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) is currently underway. The regulations will come into effect within 12 months and will significantly affect the regulation of businesses dealing with virtual currencies.
Adequacy of Legal Regulation Comprehensive legislation is missing, most legal relations are settled by analogy, a number of issues are not covered properly (for example, the goods and services tax/ harmonized sales tax (GST/HST) application), which leaves decision-making to the discretion of the regulator (ICO rules). At the same time, the Canadian regulators do not seek to stifle the blockchain technology and cryptocurrency development and apply flexible approaches to regulation, including creation of regulatory sandboxes and government incentives to spur blockchain development.
Situation with the Rule of Law Canada has high indicators of the rule of law, ranking 9th in the world among 113 countries. The conditions of the legal regulation of blockchain and cryptocurrencies are rather favorable, and since the values of the sub-criterion of the rule of law are high (0.81), the amount of the difference between weighted (multiplied by Rule of Law Index score) and unweighted assessments are not significant. This indicates low risks associated with the general conditions of compliance with legal safeguards in Canada.
Enabling Infrastructure Environment
There is a highly developed E-Government, telecommunications, and online services infrastructure in Canada. Canada also has very good environment for business development.