What to Know About the Rise of Crypto Adoption in Canada

We speak with Mark Greenberg, Managing Director for Canada at Kraken, about the rise of digital assets adoption in Canada, what trends are driving it and how it compares to adoption in the U.S.. Greenberg also talks about what the crypto regulation looks like in Canada.

What has crypto adoption in Canada been like?

Canadians have long been excited about digital assets - the very first bitcoin ATM worldwide opened in Vancouver in 2013. And over the past 10 years, we have seen crypto adoption continue to flourish and garner mainstream interest in the region.

Today, we estimate that more than four million Canadians own cryptoassets, and we expect millions more to enter the space (the total population of Canada is 40 million). An OSC survey in October 2022 found that 31% of Canadians were planning to buy cryptoassets within the next year. We are seeing increased adoption across all cohorts of the Canadian marketplace, both from individuals and institutions and from differing demographics.

How does it compare to adoption in the U.S.?

Historically, Canadians have been slightly more risk-averse investors than Americans, and we have seen slightly slower adoption of cryptoassets in Canada. But we have recently seen a growing interest in the digital asset space from the region as more Canadians have purchased cryptoassets. Our local regulatory regime - with clear registration guidelines and rules for crypto-trading platforms - is playing a helpful role, and increasing Canadian clients' confidence to enter the digital asset market.

What trends in the crypto space are driving adoption in Canada?

Canada has not been immune to the recent cryptoasset market downtown occurring globally. In addition, the Canadian Securities Administrators have put in place new rules for all crypto trading platforms.

These circumstances combined have caused options to buy and trade digital assets to shrink in Canada. There have both been a number of global exits Binance, OKX, Bybit to name a few), but also mergers among Canadian-only players (such as Coinsmart, CoinSquare and WonderFi merging).

Canada remains a crucial market to empower people with new ways to connect and transact.

Do you think adoption will rise in Canada in the coming years? Why or why not? What will it depend on?

Absolutely; I am bullish on cryptocurrencies globally and even more so in Canada where we have a high proportion of people underserved by the existing traditional financial system.

We believe more people want to know their financial assets are held 11 so they can be withdrawn if requested. Therefore, it is not surprising that 38% of Canadians believe cryptoassets will play a key role in financial services in the future.

Recently, Canadian regulators have provided clear processes on crypto operations. For Kraken, this clarity allows us to invest even more deeply in Canada, knowing we have a clear rulebook on how to operate our business. And Kraken believes this will drive investment across the industry as well.

Are there specific cryptoassets that are most popular?

BTC and ETH continue to be the most popular in Canada - even more so than in some other markets. We also see a disproportionate amount of interest in Canada for FLOW perhaps given its connection to Vancouver-based Dapper Labs.

What do regulations of crypto look like in Canada?

Crypto trading platforms are regulated by two separate regulatory groups here in Canada. FINTRAC The Financial Transactions & Reports Analysis Centre of Canada) is responsible for overseeing Know Your Customer KYL and Anti-Money Laundering AML rules. They set the rules that help us prevent money laundering, terrorist financing and fraud. The Canadian Securities Administrators CSA and the Ontario Securities Commission as our primary regulator - is responsible for protecting Canadian investors from unfair, improper or fraudulent practices. Their remits spans across a broad range of market structures, including the sale and trading of crypto assets.

FINTRAC requires crypto trading platforms to follow the same rules as all other money services business in Canada. The CSA has recently put in place a regime specific to crypto trading platforms, which includes rules such as:

• Segregation of Canadian client assets, held in trust for clients
• Use of specific client risk disclosures
• Limits to the amount of cryptoassets specific types of clients can buy
• Restrictions on the use of margin and futures

While there are definitely components of the Canadian Securities Administrators’ enhanced investor protection guidance we disagree with, we are pleased to have clear guidance for crypto companies to follow. We will continue to engage with regulators to ensure all clients can access the digital asset space and secure their own financial freedom.

This interview originally appeared in our TradeTalks newsletter. Sign up here to access exclusive market analysis by a new industry expert each week. We also spotlight must-see TradeTalks videos from the past week.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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