CANADA Law and Practice Contributed by: Irbaz Wahab, Cloudhaus Law
be cautious in onboarding crypto-asset clients, often requiring firms to demonstrate meaningful transac- tion volumes, operational stability, deep compliance infrastructure and strong regulatory alignment before agreeing to provide services. This reluctance is driven primarily by the compliance burden and reputational risk that chartered banks associate with the crypto- asset sector, particularly given the elevated AML/CTF obligations that arise when banking virtual currency businesses. As a result, many crypto-asset firms in the early stages of their operations find themselves with- out access to conventional banking services until they can establish a track record that satisfies a bank’s internal risk appetite. Neobanks and electronic money institutions are generally more open to onboarding crypto-asset businesses and have become an impor- tant source of banking and payment services for firms in this sector. As the regulatory framework matures and more crypto-asset firms achieve full registration status, access to traditional banking relationships is Canada has not enacted federal legislation specifical- ly targeting the environmental impacts of blockchain technology. The environmental footprint of crypto- asset mining, particularly proof-of-work mining, has become a policy issue at the provincial level due to its substantial electricity consumption and compet- ing demands on Canada’s hydroelectric resources. Several provinces including Quebec, British Colum- bia and Manitoba have introduced restrictions on new mining connections, while Alberta has taken a more permissive approach, contributing to a fragmented regulatory landscape across the country. At the fed- eral level, evolving ESG disclosure expectations for public companies and financial institutions may indi- rectly affect blockchain businesses with high energy consumption or those accessing capital markets. The CSA has consulted on climate-related disclo- sure requirements intended to align with International Sustainability Standards Board standards, though no crypto-specific ESG reporting obligations have been enacted to date. 1.2.4 Tax The Canada Revenue Agency generally treats crypto- assets as commodities rather than currency. Disposi- expected to improve over time. 1.2.3 ESG/Sustainable Finance
tions may give rise to either capital gains or business income depending on factors such as the taxpayer’s intention, frequency of transactions, and holding period. Using crypto-assets to purchase goods or services is treated as a barter transaction and con- stitutes a taxable disposition. The implementation of CARF through amendments to the Income Tax Act will introduce significant reporting obligations for Canadian crypto-asset service providers effective 1 January 2026, with first reporting due in 2027. Notable areas of ongoing uncertainty include the treatment of hard forks, airdrops, staking rewards and DeFi activity. Firms operating in this space are strongly encouraged to seek dedicated tax counsel. 1.2.5 Insolvency Canada does not have insolvency proceedings designed specifically for crypto-asset firms. Dis- tressed crypto-asset businesses are addressed through the general insolvency regimes, primarily the Bankruptcy and Insolvency Act and the Companies’ Creditors Arrangement Act. The QuadrigaCX mat - ter illustrates several recurring challenges in crypto- related insolvencies, including difficulties in locating and recovering digital assets and complications aris- ing from the commingling of customer assets with corporate funds. The Stablecoin Act introduces initial recovery and resolution expectations for stablecoin issuers, providing a preliminary framework that was not previously a feature of Canadian law. 1.2.6 Industry and Trade Bodies CIRO functions as the principal self-regulatory organi- sation with direct relevance to the crypto-asset trading platform segment registered as investment dealers. CTPs registered in this manner are required to comply with CIRO requirements, including rules addressing capital adequacy, custody of client assets, stand- ards of business conduct, and complaint handling. The Canadian Web3 Council operates as an industry representative organisation for blockchain and crypto- asset businesses, advocating on behalf of its mem- bers and engaging with regulators and policymakers on matters affecting the sector.
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