Could Blockchain Revolutionize the Canadian Economy?

Although blockchain technology is still in its infancy, it has already begun to revolutionize global trade. Its allure is irresistible due to the ease with which it can replace traditional methods of documentation, smooth out logistics, increase transparency, speed up transactions, and improve trade planning and tracking.

According to experts, Canada has shown significant potential in its early days of blockchain—and they believe the country must help create conditions that will keep the momentum going. Continue reading to find out more about the impact of blockchain on the Canadian economy.

Blockchain Revolutionizing the Canadian Economy

Blockchain also has a talent pool in Canada, which is centred on the Toronto-Waterloo Region tech corridor. Ethereum, a notable and promising project, was developed in large part in Canada, and there are blockchain incubators and other highly anticipated projects based in Toronto.

Because of its existing blockchain talent pool, openness to immigration, innovation ecosystems, stable banking sector, and other important factors, Canada is well-positioned to lead the blockchain revolution.

CEO of blockchain advisory firm Northwest Passage Ventures believes the technology can help spur a new industrial revolution in Canada and is a potential foundation for an innovation economy. According to a report, Canada ranks third in the world behind the United States and the United Kingdom when it comes to blockchain startups.

The greatest risk for Canada, however, is the opportunity cost of failing to be a global hub for potentially revolutionary technology.

The Regulatory Response to Technology

Regulation’s attitude toward blockchain technology is understandable—the decentralized, open-source ethos of the blockchain community transcends borders and facilitates transactional anonymity. Governmental control has been cited as a reason for cryptocurrency bans in China and other countries.

However, for Canada to begin capturing the potential value generated by blockchain technology, regulators and the blockchain community must reach an agreement. What might that compromise entail? We examine two of the most significant regulatory issues — securities law and taxation.

1. Taxation

Although regulatory issues are a major impediment to the success of blockchain technology in Canada, taxation should not be overlooked. At the moment, blockchain companies frequently structure their operations so that the entities issuing tokens are based in low-tax, low-regulation jurisdictions such as Singapore, Switzerland, and, more recently, Gibraltar.

Tax expenditures are an effective policy tool, and a system of tax credits and other financial incentives for blockchain startups can help Canada compete with low-tax jurisdictions while also ensuring that value created by Canadians is captured in Canada.

2. Securities Law

To date, Canadian securities regulators have reacted cautiously to the blockchain revolution, relying on existing case law and regulatory treatment of “investment contracts.” That approach is generally consistent with the SEC, though it appears that genuine blockchain developers see greater opportunities for U.S. token issuance that have demonstrated consumptive utility in practice (that is, they can be used to pay or reward contributors to the particular blockchain technology).

Token-based ventures that have been accepted by Canadian securities regulators to date (via exemptive relief, including Impak and Token Funder) have been limited in scope or subject to specific restrictions that differ from market practice in other jurisdictions.

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