A Canadian’s (Mis)adventures in Crypto

I’ve dabbled in a few different types of investment vehicles in my life, but crypto has never been one of them. It always felt like a mystery to me and I’ve mainly tried to focus on the types of investments I have a better understanding of. But a friend of mine had been investing in crypto for awhile and was getting great returns, so I thought I would give it a try. 

Keep in mind, I am from Canada – the land of frozen bank accounts, government overreach and massive inflation. The Canadian Dollar is not looking like a great investment at the moment, even against other currencies facing inflationary pressures, such as the US Dollar. So I was very interested in the concept of moving some money from fiat currency into a decentralized crypto currency. Could this be a way for us to be less beholden to the Canadian Dollar system?

Roadblocks ahead

The process of just getting our money from Point A to Point B was daunting. The first task was to wire transfer our money from one of the “Big 5” banks here in Canada to the cryptocurrency platform in the US. Unfortunately, some banks were now refusing to complete these wire transfers for people, stating concerns about fraud. Many other potential investors had been trying to transfer money for several weeks without being able to get past their bank’s gatekeepers.

Our bank actually ended up being pretty good. While the teller was hesitant to grant my transfer, regaling me with tales of someone she knew who had lost $500K to “one of these things” she put it through and I did not have any issues on my bank’s side. This is the part I was most nervous about after hearing of other people having issues, so I thought I was in the clear once we made it past this part.

But, unfortunately, we were not out of the woods yet. Now we had to wait for the cryptocurrency platform to do their part and get our money into the account on their end. This ended up taking around 5 days due to some administrative issues but finally I received an email confirming the money was in our account and a pleasant “Happy Trading!” message to boot. We were finally out of the woods and ready to get this show on the road!

Except, of course, we weren’t. Because, here in Canada, we like to make things difficult.

Are you freaking kidding me?

I really can’t title this section anything else because what other reaction can a person have when events play out this way?

I swear to you, Dear Reader, that not two minutes after I received this email from the cryptocurrency platform with the very clear “Happy Trading!” message stating I was good to go, my friend called me in a bit of a panic. She had received an email from this exact platform – the one that literally just accepted my money and charged me a fee for the pleasure – saying they could no longer support Canadians and that we had until May 21 to get our money off the platform. Transferring to another exchange was not allowed; the money had to be sent back to a bank.

I was shocked and thought there must be a mistake – why would they accept my money knowing I was Canadian and would not be allowed to do anything? Immediately, we knew the Canadian government had its grubby hands in this somehow. And this was confirmed when we spoke to a representative from the platform who said it was due to the new regulations and red tape our government was imposing.

Had this happened the day before, our wire transfer would have been bounced back to us, no harm, no foul. Had it happened a day later, we would have had time to transfer our USD into USDT (a stable coin linked to the value of the USD) and get it off this platform and into a Tron wallet to move forward with the purchase of our crypto investment.

Instead, we ended up in a limbo zone where we needed to set up a transfer back to our bank. Not wanting to be forced to convert our USD back to CAD, we are having some extra administrative hassle that is prolonging the process. We should have the money back shortly but COME ON.

Was this divine intervention? Did the stars perfectly align to prevent us from making this investment? It would almost seem so, wouldn’t it?

Or, could it just be the Canadian government getting overly involved in our affairs yet again? 

Perhaps it is a bit of both.

So, what actually happened?

It turns out that back in 2021 Canada made the following changes to the regulations around cryptocurrency platforms:

1. New KYC and AML rules: KYC (Know Your Customer) and AML (Anti-Money Laundering) regulations are pretty standard when dealing in securities in Canada. Essentially, they assist in identity verification and fraud prevention and suspicious transactions must be reported to FINTRAC (Financial Transaction and Reports Analysis Centre of Canada). Crypto platforms did not previously need to follow these requirements.
2. New licensing rules: Crypto platforms must register with FINTRAC as Money Services Businesses (MSBs), meaning they have to meet specific regulatory requirements such as reporting large transactions and maintaining transactions records.
3. Proposed tax changes: The proposed tax rules meant that businesses receiving payment in cryptocurrency needed to report transactions and the value of cryptocurrency received as income. Additionally, crypto held in a personal account would be subject to capital gains tax when sold or exchanged.

Clearly cryptocurrency, once considered the wild west of investing, is becoming regulated much like other securities in Canada. On its surface, this isn’t necessarily a bad thing. These new rules aren’t anything too crazy and are actually pretty standard Canadian fare.

But even though some of this oversight is certainly beneficial, does anyone really believe this is for our benefit? Or is it just more government control?

Anyway, while these new rules were put in place in 2021, they really weren’t being enforced very strictly. Between transition periods and a time-consuming registration period with FINTRAC, it didn’t seem like the regulators were in a rush to push this through. Plus, you know, there was a “pandemic” going on and what not.

“Enhanced Expectations” for your safety

Enter the FTX collapse in late 2022. This sent Canadian regulators into a tizzy and this is when the 2021 rules finally got some teeth.

Along with committing to aggressive enforcement of the previously mentioned regulations, they now also had some new rules – referred to as “enhanced expectations” – pertaining to the functionality of the platforms.

These “enhanced expectations” included the following:

1. Keeping Canadians’ cryptocurrency separate from the company’s own money, essentially holding funds in trust so that if the platform were to collapse, Canadians’ funds would be safe.
2. Not allowing customers to “trade on margin” or offering any types of debt or borrowing.
3. No longer able to offer stablecoins – a cryptocurrency pegged to the value of a fiat currency – unless they get specific permission from regulators. In my opinion, this requirement was put in place to make it easier to track capital gains for taxation purposes.

The hammer drops

In February 2023, Canadian regulators announced any crypto platforms that wanted to continue to serve Canadians had only 30 days to provide an official “pre-registration undertaking” showing they were working to comply with these new regulations. Any platforms that did not move forward with the new rules were instructed to wind down their Canadian clients’ accounts and block Canadians from their platforms. 

And this is why I was unable to move forward with my trades on that particular cryptocurrency platform. It has been a super frustrating experience but one I will definitely learn from. And it just further drives home the point that our government is making it more difficult to do business and invest in Canada. 

Now, I am clearly not a crypto currency expert, I’m just sharing my experience and what I learned about the regulatory environment around crypto here in Canada through this debacle. There are tons of crypto platforms and while some of them are bowing out of Canada due to the regulatory environment, there are certainly some that are staying. So, all is not lost if you are a Canadian attempting to invest in crypto. But definitely do your research first and make sure you understand what your best path forward looks like amid the turbulent conditions. 

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Lisa is an aspiring expat from Canada who is working to put together her Plan B with a young family in tow. She is excited to pair her lifelong love of writing with her passion for offshore strategies and outside-the box investments in her weekly articles for Escape Artist readers. Follow this “rebel with a cause” as she walks the path less traveled and shares her experiences along the way.

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