Let go of digital currency! Canadian Senate calls for loosening regulations

Digital currencies like Bitcoin, which were once considered a game for geeks and enthusiasts, have become a worldwide phenomenon and have gained more public attention. This has attracted the attention of regulators and governments, including the Senate of Canada (the upper house of the Canadian Parliament). Based on its latest findings, this summer, the Senate Committee conducted an assessment of the challenges and opportunities that digital currencies pose to banks, trade and industry, and completed a report titled "Digital Currency: Money You Can't Flip!"

The report, which comes from a survey of a large number of experts and industry insiders, concluded that the benefits of digital currencies outweigh the risks. To this end, the report recommends that the Canadian government conduct "lightweight regulation" to create a relaxed environment that encourages digital currency innovation and allows related technologies to flourish.

Although the report only represents the opinion of the Senate, it provides a general direction of the government's thinking. In particular, the Federal Political Consultative Conference chose not to legislate on digital currency before waiting for the conclusion of the Senate's investigation. The new federal government will hold elections at the end of October, so the Senate's attitude towards digital currency after that remains to be seen. But usually, the Senate's report is generally considered to be highly authoritative and usually supported by the House of Commons. The new Liberal Party government will also tend to the Senate's attitude. It advocates letting go of regulation and recommends that the government legislate only when there are huge problems with digital currency.

Legal risks and possible government response

The report also identifies some of the risks that digital currencies may pose, including money laundering, terrorist financing, and tax evasion. The report highlights the fact that the anonymity of digital currencies makes them particularly conducive to illegal activities. The report points out that the best way is to regulate digital currency exchanges, which are the most important importers and exporters of digital currencies. Based on this, the report recommends that the federal government needs to impose some compliance requirements on digital currency exchanges, such as requiring customer identity authentication when it comes to currency.

The report also suggests that the federal government could work with other countries around the world to develop global guidelines for digital currencies, and it is best to consider implementing a lightweight regulation. If this is done, it will mean the beginning of global regulation, and it may also herald the development of a global regulatory framework or even international treaties. Such development may take some time, but any such international consensus, once reached, will also affect Canada's regulatory environment. So people in the industry are watching the development of the situation closely.

Tax implications of digital currencies

The report also summarizes the tax implications of digital currencies for government departments and agencies. It is worth noting that the Ministry of Finance prefers to adopt minimal regulation so as not to hinder innovation, which is the view of the Royal Canadian Mounted Police. Supporting the Senate's call for light-weight regulation, in turn, it also indicates that the Canadian government may choose to adjust the current tax structure to manage digital currencies. The report also recommends that the federal government issue a concise message on digital currency tax obligations without attaching any unnecessary responsibilities. The report already includes the opinions of the Ministry of Finance and the Canada Revenue Agency, so it is very constructive. In particular, both of them intend to classify digital currencies as products or commodities for taxation, so that digital currency investments will not be taxed in terms of capital gains and losses. Therefore, business models engaged in digital currency transactions may be able to obtain similar tax treatment.

in conclusion

The Senate is relatively optimistic about the potential of digital currencies, but warns against a knee-jerk approach to regulation due to fear and uncertainty. Instead, the Senate calls for a hands-off approach to regulation, which, if it is the case, means that digital currencies will continue to be in an unregulated environment for the foreseeable future.

Original article: http://www.jdsupra.com/legalnews/hands-off-digital-currencies-canada-s-74207/
By Eric Belli-Bivar
Translation: Prince Gong