When you sign up with currency exchange brokers, it is important to ensure that they tell you which circulating currencies are right for you. The notice issued by the CSA contains many abstract statements such as focus on substance over form,” typical commercial practice,” and intention to make and take immediate delivery.” This highlights how difficult it is to produce clear definitions and apply the traditional set of terms and rules to the trading and exchange of cryptocurrencies and other crypto-related activities.
In general terms, where a taxpayer does not engage in the business of trading in cryptocurrency (i.e., the taxpayer acquires such property bitcoin exchange canada for a long-term growth), any gain or loss generated from the disposition of cryptocurrency should be treated as on account of capital.
While the U.S. Securities and Exchange Commission (the SEC”) has not come out with a comprehensive bulletin in the way the CSA had regarding the specific test for determining whether a cryptocurrency was a security, the SEC has published a bulletin meant to act as guidance for investors as well as a Report of Investigation under Section 21(a) of the Securities Exchange Act of 1934, related to an investigation conducted of The DAO, an entity which began offering and selling their own tokens (the DAO Tokens”) to raise capital.
The Staff Notice also pointed out that cryptocurrency exchanges that permit trading of coins, tokens or cryptocurrencies that qualify as securities” against national fiat currencies or other cryptocurrencies will also be subject to Canadian securities law requirements if some market participants are located in Canada.
In particular, the Staff Notice refers to a range of diligence activities that a fintech business that is establishing a cryptocurrency fund must undertake in respect of cryptocurrency exchanges and custodians that will be used, and fintech businesses are advised to also be prepared to discuss other issues with securities regulators.
There is still quite a bit of confusion about whether cryptocurrencies are valid as currency in India and the RBI, which has authority over clearing and payment systems and pre-paid negotiable instruments, has certainly not authorized buying and selling via this medium of exchange.
The regulatory backdrop for this landmark registration is provided by the Canadian Securities Administrators (CSA) in Staff Notice 46-307 – Cryptocurrency Offerings (Staff Notice), which was published in August (see our September 2017 Blakes Bulletin: Industry Responds to CSA Guidance on Cryptocurrency Offerings ). The Staff Notice also included a discussion of the issues raised by cryptocurrency investment funds, which fund sponsors and distributors must be prepared to address.