Field Notes: Cryptoasset Regulation in Canada @ Toronto Blockchain Week
As part of Toronto Blockchain Week, Shyft’s Chairman and co-founder Joseph Weinberg joined a lively panel of regulatory and fintech experts to assess the future of cryptoasset regulation in Canada. Joseph was joined by Osler’s Lori Stein and Lawrence Ritchie (who served as moderator), as well as Tanya Woods of the Chamber of Digital Commerce and Magdalena Gronowska of the Canadian Digital Asset Coalition.
The panel was inspired in great part by the Proposed Framework for Crypto-Asset Trading Platforms report jointly released by the CSA (Canadian Securities Administrators) and IIROC (Investment Industry Regulatory Organization of Canada) in March. The report signals some of the first serious work done by Canadian regulatory organizations to take cryptoassets seriously and perhaps signpost the future of crypto regulation in Canada more broadly.
The need for careful, informed assessment
Much of the panel’s discussion revolved around the relationship between the private sector, regulatory actors, and the politicians who can act as public advocates or obstacles. As someone who’s spent much of the last year and a half working with governments around the world to discuss these exact issues, Joseph had a lot to say about the need for regulators to be proactive and responsive — and not to categorize new technology before you understand it.
We’ve spent a lot of time in multiple jurisdictions understanding that you have to compartmentalize all of these things — you need to look and understand, what is custody? What are the requirements? You need be assessing very specifially what is a security, what is a utility, and that goes the same for every asset in the space.
On Quadriga and disaster response
Of course, in any discussion of blockchain, crypto, and regulation in a Canadian context, there had to be significant discussion of the QuadrigaCX fiasco and how such a situation might be reasonably avoided in the future. One of Joseph’s key points was that in the search for the correct approach, regulators and government bodies should be looking for the best practices that have already been developed, rather than trying to impose new ones:
Ensuring the security of assets is really important to the integrity of the platform and trading. I think that from a regulatory perspective things are moving very quickly and I think standards in the space from industry players should be the thing that’s pushed upon. When they say that regulation is going to come in to try to fix something that happened, something that everyone in the ecosystem knew well was bound to happen as [Quadriga] was always operating in a set of gray areas. You can’t approach things that way; you have to take an approach of, ‘listen we’re not going to write regulations, we’re going to bring in standards written with the ecosystem’, because Binance, Bitfinex, and other large exchanges know how to do what they’re doing.
We all use the same procedures, we all use the same standards, and we’re quite a lot better than anyone else who is going to try to understand everything from outside. So for me this is more about enforcement than regulation. What you do not do is eliminate good work and put fear into the business.
The Canadian mindset (and overcoming it)
After some lively discussion between audience members and the panel, the discussion eventually turned to the broader issues with the Canadian innovation sector and what needs to be done in order to encourage startups and innovators to stick around rather than head to greener pastures. Besides the political timidity discussed by Tanya and other panelists, Joseph pointed to a more deep-seated issue, one of the Canadian mindset:
I think that we’re stuck in this misconceived idea that, we’re Canada, we’re a first-world country, we can just hang out and things never really have to change.That’s been the consensus for a long time, but before you know it the whole world will shift under your feet and you have no idea what’s going on and you’re kind of playing catch-up. I also think it’s really important to understand that we are not the United States. We are not a 400-plus million person population. We might talk the same way, our laws are very similar, but where you go in the future cannot depend on the partner that sits next to you only because they were there in the past.
We want to thank Osler and Toronto Blockchain Week, as well as all the panelists for a varied and lively discussion that we hope might have inspired a few in attendance to ping their MPs and MPPs…
**Regulators are now consulting on a Proposed a Framework for Cryptoasset Trading Platforms in Canada. We’ve made it easier to participate w/ optional Qs & multiple choice answers and you can respond by May 1st: