Canada – A Leading Nation in Blockchain Technology
July 1, 2018
In lieu of Canada Day 2018, we wanted to recap why Canada is one (if not the) strongest leaders in blockchain technology and cryptocurrency. Partly Canada’s dominance in Blockchain innovation stems from being home to Vitalik Buterin, inventor of the Ethereum Blockchain. Ethereum is consistently top tokens in the world for as long one can remember, sitting right beside bitcoin. Canada is a leading crypto nation based on its innovation, low energy costs, high internet speed, strong tech scene and favorable regulatory regime. With it’s currently light cryptocurrency regulation, Canada is a great place to pursue blockchain. Excessive regulation could stifle innovation; accordingly, Canada lightly regulates cryptocurrency/ICO/tokens and offers a wide selection of government — federal and provincial — incentives and aid to startup tech companies.
Last year, with the boom in Ethereum Blockchain based ICOs that raised $4 Billion worldwide, the Canadian Securities Administrators suggested that Canadian Securities Law may be potentially applicable to cryptocurrencies. The Ontario Securities Commission (OSC) on the other hand granted regulatory relief to allow Ontario’s first regulated ICO under existing exemptions in securities laws. And the British Columbia Securities Commission approved Canada’s first registered cryptocurrency investment fund, acknowledging that it views cryptocurrency investments as a new and novel way to invest. This ruling allowed pension, investment and venture capital funds including the Ontario Municipal Employees Retirement System’s Ethereum Capital to invest in cryptocurrencies and tokens. Many other private funds are also emerging for blockchain startup funds in Canada. This year, amid extreme market volatility, Canada’s first Blockchain exchange-traded fund began trading on the Toronto Stock Exchange. And OSC started examining the business activities of several exchanges on the concern that they were allowing trading in tokens that would otherwise qualify as securities.
Much of the country talks surrounding blockchain always gets combined with cryptocurrency. The questions most frequently asked is usually around legality and regulation. So let’s address how Canada handles virtual currency. Canada offers cryptocurrency taxation with incentives. According to an article by Cointelegraph “The Canada Revenue Agency (CRA) began taxing cryptocurrencies in 2013, but to bolster technological and scientific innovation the –Federal and provincial—governments provide various Research and Development (R&D) tax incentives.
Laura Gheorghiu a tax partner at Gowling WLG explained that the CRA has characterized cryptocurrency as a commodity, therefore the exchange of it becomes a taxable event as a barter transaction giving rise to either business income (fully taxable) or capital gains (50% taxable)— depending on the facts and circumstances– measured according to the value of the assets exchanged in Canadian Dollars. If a cryptocurrency is held as a capital asset (like an investment), then the gain is classified as a capital gain and taxed as such. If the cryptocurrency is situated, deposited or held outside of Canada directly or through funds, taxpayer must adhere to foreign reporting rules. If an employee receives cryptocurrency as payment for salary or wages, or otherwise in connection with employment, the amount, computed in Canadian dollars, is included in the employee’s income. Mining of cryptocurrencies is taxed as either a business or a personal hobby (non-taxable). Business income, wages or capital gains are taxed at the applicable tax rate for the taxpayer in question. The general combined Federal/provincial income tax rates in Canada vary between 26.5% to 30% for corporations and 44.5% to 58.75% for individuals depending on the province. A non-resident that carries on a business in Canada, is subject to taxation under the same rules as a Canadian resident. Cross-border payments of rents or royalties in cryptocurrency to a non-resident are subject to a withholding tax of 25%, that may be reduced under an applicable tax treaty.”
Despite a series of public warnings from securities regulators at all levels of government, crypto-criminals need to know that state and provincial securities regulators are taking swift and effective action to protect investors from their schemes and scams. ICOs raised more than US$5 billion in 2017 but 2018 promises to be even more remarkable. Token sales raised more money in the first quarter of 2018 than the whole year 2017.
Canada is also home to blockchain centric company Quantaloop Technologies. Quantaloop is currently working on many blockchain community initiatives including QuantaHub, a shared workspace geared as the first shared-work space, a gamified crowd-funding platform and a main net. Quantaloop is pro-regulation and is doing all due-dilgence to be compliant as neccessary. If you are a Canadian blockchain startup looking for office space, partnerships, funding or simply a support network with other technologist such as yourself, send a hello to us via CS email: firstname.lastname@example.org, we’d love to hear about your project!
SRC: CoinTelegraph, CoinJournal, Quantaloop