Apr 2024


Law Over Borders Comparative Guide:



1 . Are cryptoassets (including, for example, cryptocurrencies, stablecoins and non-fungible tokens) defined and, if so, what are the major elements?

In Canada, the provision of services relating to cryptoassets is generally regulated under Canadian AML Law and Canadian Securities Law (see Question 2, below). 

The Proceeds of Crime (Money Laundering) and Terrorist Financing Act (PCMLTFA) defines “virtual currency” as “a digital representation of value that can be used for payment or investment purposes that is not a fiat currency and that can be readily exchanged for funds or for another virtual currency that can be readily exchanged for funds; or a private key of a cryptographic system that enables a person or entity to have access to a digital representation of value referred to prior.” The effect of this definition is to limit the application of AML obligations under the PCMLTFA to services relating to cryptoassets that function as a means of payment or as an investment, and the providers of such services.

The Canadian Securities Administrators (CSA) have published an online investor tool that sets out the following definitions and types of cryptoassets:

  • Cryptoassets: purely digital assets that use public ledgers over the internet to prove ownership. They use cryptography, peer-to-peer networks, and a distributed ledger technology — such as blockchain — to create, verify, and secure transactions.
  • Cryptocurrency: a digital currency or medium of exchange. It can be used to buy products or services, or for speculative purposes, such as trading on a cryptoasset trading platform. Cryptocurrencies have no inherent value; their perceived value is based largely on supply and demand in the market. Examples include Bitcoin (BTC), Ether (ETH), Ripple (XRP), and Litecoin (LTC). 
  • Utility tokens: use a distributed ledger or blockchain platform to provide access rights to a specific product or service, or to be used to purchase specific products or services. The provider of the products or services typically issues the tokens, which can only be used within the issuer’s network. 
  • Security tokens: sold or auctioned in a token-generating event such as an Initial Coin Offering or an Initial Token Offering. These events allow businesses to raise money to fund an idea or business model. 
  • Non-fungible tokens (NFTs): record ownership of a unique tangible or intangible object, such as a song, digital image, or video. “Non-fungible” means these tokens cannot be exchanged for one another, each one is unique. 

Although the CSA’s investor tool does not have the force of law, it reflects the approach taken by the CSA when imposing legally binding terms and conditions of registration on custodial cryptoasset trading platforms (CTPs) that are registered as dealers under Canadian Securities Law (Dealer CTPs). 

The CSA have also published staff notices which express the view that stablecoins may constitute securities and/or derivatives in several Canadian jurisdictions, and established the following categories of cryptoassets:

  • Value Referenced Cryptoasset (VRCA): a cryptoasset that is designed to maintain a stable value over time by referencing the value of a fiat currency or any other value or right, or combination thereof.
  • Fiat-backed Cryptoasset (FBCA): a VRCA that seeks to replicate the value of a single fiat currency where the issuer sets aside an adequate reserve of assets denominated in the fiat currency.

The term “VRCA” is included in the terms and conditions (CTP T&C) of all Dealer CTPs registered since February 2023. Some CTP T&C also include the following categories of cryptoassets:

  • Proprietary Token: a cryptoasset that is not a VRCA, and for which a Dealer CTP or its affiliate acted as the issuer (and mints or burns the cryptoasset) or a promoter. 
  • Stakeable Cryptoassets: (i) cryptoassets of blockchains that use a proof of stake consensus mechanism; and (ii) the staked cryptoassets that are used to guarantee the legitimacy of new transactions added to the blockchain. The CSA is of the view that services offered by CTPs, by which the CTP arranges to stake cryptoassets and earn staking rewards for participating clients (Staking Services), engage Canadian Securities Law. 

2 . What are the major laws/regulations specifically related to cryptoassets?

The provision of services relating to cryptoassets is generally regulated under Canadian AML Law and Canadian Securities Law. The provision of services related to cryptoassets is also subject to other laws of general application in Canada including consumer protection, privacy/data protection and tax laws. 

Canadian AML Law

Canada’s federal AML regime is prescribed in the PCMLTFA, regulations made under the PCMLTFA and guidance issued by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) (Canadian AML Law). FINTRAC is informed by the global standards of the intergovernmental Financial Action Task Force, of which Canada is a member.

Canadian Securities Law 

In Canada, all ten provinces and three territories are individually responsible for regulating the securities and derivatives markets in their jurisdiction. Securities regulators from each province and territory have teamed up to form the CSA. The Securities Act of each Canadian jurisdiction, the Derivatives Act or Commodity Futures Act in force in certain Canadian jurisdictions and all regulations, instruments, orders, rules, staff notices and other policy pronouncements made by the securities regulators in the jurisdictions, are collectively referred to as “Canadian Securities Law”.

Canada was one of the first countries in the world to permit the public offering of cryptoasset investment funds. In April 2020, the Bitcoin Fund, a closed-end investment trust which had the investment objective of providing investors with exposure to BTC and the daily price movements in the US dollar price BTC, completed its initial public offering. As of July 2023, there were 21 exchange-traded funds (ETFs) and similar products available for trading on Canadian stock exchanges that provide investment exposure to BTC and/or ETH, with assets under management of close to CAD 3 billion. In January 2024, the CSA published proposed amendments to the Canadian rules governing public investment funds to add specific requirements for “Public Crypto Asset Funds”.

The CSA have collaborated on regulatory guidance regarding the application of Canadian Securities Law to cryptoassets and cryptoasset market intermediaries. CTPs that offer trade execution and custody services for cryptoassets to Canadian clients are required to register as dealers under Canadian Securities Law, and CTPs that provide automated order-matching facilities for cryptoassets are regulated as marketplaces under Canadian Securities Law. 


3 . How are different types of cryptoassets regulated?

The CSA have imposed prohibitions and restrictions on trading in certain types of cryptoassets. However, these restrictions apply only to Dealer CTPs. They are not blanket prohibitions which outlaw the use of cryptoassets by Canadians. 

The CSA have imposed the following restrictions on dealings in cryptoassets by Dealer CTPs and CTPs that have submitted pre-registration undertakings (described further in Question 4, below): 

Cryptoassets that are securities or derivatives

Dealer CTPs are prohibited from dealing in a cryptoasset that is, itself, a security or derivative, as determined by a “Know Your Product” (KYP) due diligence analysis of each cryptoasset which the Dealer CTP is required to perform, including consideration of statements made by the CSA, other regulators in IOSCO-member jurisdictions or the regulator with the most significant connection to the relevant cryptoasset.

Cryptoassets issued by bad actors 

Dealer CTPs are prohibited from dealing in cryptoassets issued by or on behalf of a person or company that is or has in the last five years been the subject of an order, sanction, fine, or penalty imposed by, or has entered into a settlement agreement with, a government or government or administrative agency, self-regulatory organization, tribunal or court in Canada or in certain foreign jurisdictions in relation to a claim based on fraud, theft, deceit, aiding and abetting criminal activity, misrepresentation, AML violations, insider trading, market manipulation or allegations of similar conduct.

Investment limits 

In some Canadian jurisdictions, including Ontario, Dealer CTPs must cap sales to self-directed retail investors of cryptoassets other than BTC, ETH, LTC and Bitcoin Cash (BCH) to a net limit of CAD 30,000 in a 12-month period.

Proprietary tokens

Dealer CTPs are prohibited from offering proprietary tokens.

Staking services 

Dealer CTPs may only offer staking services in respect of stakeable cryptoassets, and in compliance with terms and conditions prescribed by the CSA (Staking T&C). The Staking T&C impose obligations regarding: 

  • due diligence of stakeable cryptoassets, including operations of the proof-of-stake network, and the validators engaged by the CTP; 
  • client disclosure regarding staking risks; 
  • custody and segregation of staked cryptoassets; and 
  • other investor protection requirements.


As of December 29, 2023, Dealer CTPs can only offer VRCAs that comply with new terms and conditions prescribed in CSA Staff Notice 21-333 CTPs: Terms and Conditions for Trading in VRCAs with Clients (VRCA T&C). 

All VRCAs offered under the VRCA T&C must be FBCAs which reference CAD or USD on a one-for-one basis, provide redemption rights to accountholders and maintain a segregated, liquid reserve of assets that are measured at fair value daily and held with a “Qualified Custodian”. 

Beginning on October 31, 2024, all VRCAs offered under the VRCA T&C must be issued by a VRCA issuer that has given a prescribed form of undertaking to the CSA (the VRCA Issuer Undertaking), which requires the VRCA issuer to publicly disclose audited annual financial statements, monthly attestation reports and other material information about the VRCA. The VRCA Issuer Undertaking also gives broad examination rights for the CSA to review the business, conduct, financial affairs and books and records of the issuer, its affiliates and control persons for the purpose of determining if the issuer is in compliance with the VRCA Issuer Undertaking or Canadian law or acting contrary to the public interest. 

The VRCA T&C include a carve-out from the general prohibition against dealing in cryptoassets that are, themselves, securities or derivatives, which will apply to FBCAs that satisfy the CSA’s stringent requirements. Such FBCAs will also be excluded from the CAD 30,000 annual investment limit applicable in some CSA jurisdictions. 

Algorithmic stablecoins and wrapped tokens

The VRCA T&C prohibit Dealer CTPs from offering VRCAs that are not FBCAs. This includes algorithmic stablecoins and “wrapped tokens”, defined by the CSA based on the definition in the IOSCO Decentralized Finance Report (March 2022) as: “crypto assets created on a blockchain synthetically for a given token on another blockchain, thereby enabling the reference token to be used on a different blockchain”. 


4 . Is there an authorisation/licensing regime applicable to cryptoasset issuers/providers/exchanges and, if so, what are the requirements?

Canadian AML Law: dealers in virtual currency

Under Canadian AML Law, an entity that is “dealing in virtual currency” would be considered to be acting as a money services business (MSB) under the PCMLTFA and required to register with FINTRAC as an MSB (if it has a place of business in Canada) or a Foreign MSB (if it does not have a place of business in Canada).

The PCMLTFA does not define “dealing in virtual currency”, but FINTRAC has stated that persons or entities are considered to be “dealing in virtual currency” when they engage either in the business of providing (1) “virtual currency exchange services” or (2) “virtual currency transfer services”. “Virtual currency exchange services” include exchanging funds for virtual currency, virtual currency for funds, or one type of virtual currency for another type of virtual currency, while “virtual currency transfer services” include the transfer of virtual currency at the request of a client, and the receipt of virtual currency on behalf of a client. 

An entity is considered a Foreign MSB if it: 

  • is engaged in the business of providing at least one MSB service in Canada (which would include providing online virtual currency exchange or remittance); 
  • does not have a place of business in Canada; 
  • directs its MSB services at persons or entities in Canada (which would include marketing directed to persons in Canada, having a .ca domain name or listing the business in a Canadian directory); and
  • provides these services to clients in Canada (i.e. clients who have a connection or residential tie to Canada).

For Canadian MSBs, the registration process is fairly straightforward. An online form is completed, and provided that the legal entity seeking registration is in good standing and, for an individual, does not have a criminal record for certain listed offences, including money laundering and terrorist financing offences, the registration is typically approved within a few weeks. The process is somewhat more involved for FMSBs, which must complete a more detailed form that includes criminal record checks for key individuals. Provided the entity is in good standing and key individuals have a clean criminal record, FMSB registration is typically approved within six to eight weeks. 

An MSB that offers custodial services to clients for the cryptoassets that it trades and/or remits on behalf of such clients must also register as a Dealer CTP under Canadian Securities Law.

Provincial MSB registration 

Provincially, the Québec Money Services Businesses Act requires persons offering virtual currency exchange or virtual currency transfer services in Québec to obtain a license, unless these activities are offered solely as part of activities that are also governed by the Québec Securities Act. Consequently, a Dealer CTP that is registered under securities laws in Québec would not be required to register as an MSB under the Québec legislation.

No other Canadian jurisdiction has adopted AML legislation or an MSB registration regime. In 2023, the British Columbia government introduced money services business legislation, but it will not capture dealing in virtual currencies.

Canadian Securities Law: regulation of CTPs as dealers and marketplaces 

In March 2021, the CSA published Joint CSA/IIROC Staff Notice 21-329 Guidance for Crypto-Asset Trading Platforms: Compliance with Regulatory Requirements (SN 21-329), which clarified the CSA’s position regarding when the activities of a CTP engage Canadian Securities Law. 

SN 21-329 states that a CTP that offers services for trading in cryptoassets must register as a dealer in securities and/or derivatives if the CTP facilitates the trading of: 

  • cryptoassets that are securities; or 
  • cryptoassets that are not, themselves, securities or derivatives, but are held in an account with the CTP, unless the agreement between the CTP and its users “creates an obligation on the CTP to immediately transfer ownership, possession and control to the CTP’s user and as a result there is delivery to the user”. 

The CSA refer to the account between a custodial CTP and its clients as a “Crypto Contract”, which is regulated as a security and/or derivative across the CSA.

By establishing the concept of a “Crypto Contract”, the CSA exerted jurisdiction over all CTPs that offer cryptoasset trade execution and custodial services to Canadian residents, notwithstanding that BTC and ETH are generally accepted to be commodities, and not securities. SN 21-329 also states that a CTP that operates an automated order-matching facility on their platform is considered a marketplace for securities or derivatives under Canadian Securities Law and must be recognized or exempt from recognition as a marketplace to offer such services in Canada. 

The CSA maintains an online register of Dealer CTPs, CTPs that have filed pre-registration undertakings and banned CTPs at www.securities-administrators.ca/crypto-trading-platforms-regulation-and-enforcement-actions.

Each Dealer CTP has accepted bespoke CTP T&C which provide exemptive relief from the prospectus requirement for Crypto Contracts offered by Dealer CTPs and impose obligations on Dealer CTPs with a view to reducing the investor protection risks associated with their operations. 

Dealer CTPs are restricted from dealing in certain types of cryptoassets, as described in Question 3, above. Dealer CTPs are also subject to the solvency, proficiency and integrity requirements that apply to all securities registrants, modified as needed to accommodate differences between cryptoassets and securities. Under the CSA’s time-limited interim registration framework, the process for becoming registered as a Dealer CTP and, if applicable, exempt from recognition as a marketplace, would typically take over a year.

Pre-registration undertakings 

Since March 2023, custodial CTPs offering services in Canada that had submitted registration applications which were under review by the CSA were required to submit a pre-registration undertaking (PRU) to their Principal Regulator. The PRU contains commitments from the CTP and, in some cases, its foreign-domiciled parent company, to make efforts to bring its operations into compliance with Canadian Securities Law, including by adopting provisions of the CTP T&C prior to registration being granted. 

On April 3, 2024, Coinbase Canada, Inc. became the first affiliate of a global firm to become registered in Canada. Eight CTPs have given PRUs and continue to work toward registration. Four of those CTPs are global firms or Canadian affiliates of global firms, most of which also offer Marketplace Services.

Transition to investment dealer registration 

Most Dealer CTPs are registered with the CSA under the interim, time-limited registration described in Question 2 above. The CTP T&C require all Dealer CTPs to transition to permanent registration as investment dealers within two years from registration being granted. In Canada, investment dealers must be members of the Canadian Investment Regulatory Organization (CIRO, formerly IIROC), a self-regulatory organization that prescribes requirements for solvency, proficiency and integrity that are far more rigorous than those imposed by the CSA under the interim framework. The process for becoming a CIRO member typically takes over a year.

Enforcement against Non-Compliant Foreign CTPs

Since the publication of SN 21-329, the Ontario Securities Commission (OSC) and the Autorité des marchés financiers (AMF) have taken enforcement actions against multiple foreign CTPs for illegal dealings in securities and derivatives in Canada, focusing on those that offer derivatives and leveraged products. Many more foreign CTPs have withdrawn their services from Canada, with a wave of withdrawals occurring in March 2023 prior to the CSA’s deadline for CTPs to deliver PRUs. The OSC’s recent enforcement proceedings against foreign CTPs have involved collaboration amongst provincial securities commissions across Canada as well as foreign regulators such as the British Virgin Islands Financial Services Commission and Monetary Authority of Singapore


5 . Is the promotion of cryptoassets to consumers or investors regulated and, if so, how?

With the exception of the VRCA Issuer Undertaking described in Question 3, issuers of cryptoassets are not subject to disclosure requirements in Canada. However, Dealer CTPs must publish a “Cryptoasset Statement” for each cryptoasset offered on their platform, which is a “plain language description of each cryptoasset and the risks of the cryptoasset”. The Cryptoasset Statement must state that the CSA has not assessed or endorsed the cryptoasset, and that the Cryptoasset Statement does not avail the purchaser of the statutory rights available to a purchaser of securities under an offering memorandum.

In September 2021, the CSA and CIRO published Staff Notice 21-330 Guidance for Crypto-Trading Platforms - Requirements relating to Advertising, Marketing and Social Media Use (SN 21-333) to remind CTPs that are registered or have applied for registration as securities dealers that they are subject to regulatory prohibitions against the use of false and misleading advertising and unsubstantiated claims. 

SN 21-333 also raises concerns regarding CTPs offering their clients bonuses or rewards based on the level of trading or time-limited promotions that may encourage clients to engage in excessively frequent or risky trading. The CSA remind CTPs that registered dealers are gatekeepers to the capital markets and have an obligation to treat their clients fairly, honestly and in good faith. The CSA also suggest that marketing materials which encourage trading may be considered a form of solicitation, and therefore trigger suitability obligations. Such solicitations would contravene the exemption from the suitability obligation on which most Dealer CTPs rely, and the representations made by all Dealer CTPs that they do not provide advice or recommendations. 

SN 21-333 outlines expectations for Dealer CTPs to supervise their personnel when using social media to communicate with clients and the public for business purposes, including by implementing internal controls designed to prevent misleading and false statements, which extend to the CTPs’ directors, officers, employees, shareholders and other third parties acting on their behalf.

CTPs are also subject to federal government guidance on false or misleading representations and deceptive marketing practices provisions of the Competition Act (Canada).


6 . What anti-money laundering requirements apply to cryptoassets?

CTPs that are registered as MSBs with FINTRAC must have in place an AML compliance program, conduct Know Your Customer checks, report certain types of transactions, appoint a compliance officer, develop policies and procedures, create and maintain a training program and review its compliance program. MSBs must also submit “Suspicious Transaction Reports” to FINTRAC for every financial transaction that occurs or that is attempted in the course of their activities where there are reasonable grounds to suspect that the transaction is related to the commission or the attempted commission of a money laundering or terrorist activity financing offence.

In December 2020, FINTRAC published “Money laundering and terrorist financing indicators — Virtual currency transactions”, which provides comprehensive guidance delineating red flag indicators linked to suspicious virtual currency transactions. The guidance organizes red flags into categories dealing with the virtual currency transaction’s nature, patterns, anonymity levels, sender or recipient details, and source of funds.


7 . How is the ownership of cryptoassets defined or regulated?

Canadian courts have generally declined to opine on the specific issue of whether cryptoassets are property, but regularly recognize and enforce property rights over cryptoassets. Courts have enforced a lender’s security interest over pledged digital assets in insolvency proceedings, ordered restitution and forfeiture of cryptoassets in criminal sentencing and included cryptoassets as matrimonial property in family law orders. 

In the endorsement In the Matter of the Bankruptcy of Quadriga Fintech Solutions Corp. et al. (Ontario Superior Court of Justice. March 1, 2021) (Quadriga), the court held that the definition of property in the Bankruptcy and Insolvency Act (BIA) is “broad enough to include cryptocurrency”. 

Canadian courts have issued preservation orders and freezing orders over cryptoassets that are the subject of civil claims, as discussed in Question 11 below. Jurisprudence from the UK, Singapore, Australia, and other Commonwealth countries is expected to be implemented in this context.

Additionally, NFTs are capable of being recognized as property, much like other intangible assets fixed in a material form. NFTs can also represent copyrighted works, but the ownership of these works resides with the copyright holder, not solely with the individual who mints the NFT. Indeed, contract terms often govern the rights associated with NFTs and copies of the digital content are frequently subject to restrictive licenses.

The Canada Revenue Agency published guidance in 2014 (updated in 2021) stating that cryptocurrency is treated as a commodity for income tax purposes. Additionally, the Dealer CTP framework, described in Question 4 above, is focused on protecting the ownership rights of investors that hold cryptoassets in custodial accounts on online trading platforms. 

Consequently, even in the absence of legislation or case law which explicitly confirms that cryptoassets are property in Canada, the proprietary interests of Canadians in cryptoassets are regularly recognized by lawmakers, regulators and the courts. 

That being said, unlike the United States, no steps have been taken to amend the personal property security legislation in force in each Canadian jurisdiction to establish a specific regime for perfecting security interests in cryptoassets, similar to Article 12 of the Uniform Commercial Code (UCC). As with previous amendments to the UCC, we expect Canadian jurisdictions will adopt amendments similar to Article 12 of the UCC in the future, however, a formal process has yet to be initiated to achieve this objective. 


8 . How are Decentralised Autonomous Organisations (DAOs) treated?

There is no specific registration regime for DAOs in Canada or in any Canadian jurisdiction. Nor is there a consensus on how DAOs should be characterized as a legal entity. 

In the 2018 decision Autorité des marchés financiers (AMF) c. CreUnite, 2018 QCTMF 8 (CreUnite), the Québec Financial Markets Administrative Tribunal issued a cease trade order and other remedies against eight individuals involved in a cryptoasset project that had identified itself as a DAO on its website. The Tribunal held: “in the presence of an entity that apparently does not possess a legal personality…it [is] appropriate to make these orders against persons who reportedly identify themselves on the CreUnite website as the founders of this group”. 

In the absence of any specific precedent, we believe that Canadian courts and administrative tribunals may adopt an approach similar to CreUnite in a matter where there is evidence that an identifiable group of individuals responsible for a DAO’s activities, are within the jurisdiction of the court or tribunal and are engaged in alleged illegal distributions of securities or other misconduct. In Canada’s common law jurisdictions (outside of Québec), the individuals in the purported DAO could be considered partners in a general partnership, or members of an unincorporated association, and therefore jointly and severally liable, with all other partners or members, for the liabilities of the partnership or association. 


9 . Are there any particular laws or rules which apply in the event of the crypto bankruptcy or insolvency?

There is no legislation in Canada which prescribes rules which would apply specifically to cryptoassets held by an insolvent debtor. Accordingly, insolvencies involving cryptoassets and/or cryptoasset market intermediaries are governed in accordance with general insolvency law in Canada, including the BIA and the Companies’ Creditors Arrangement Act (CCAA).

The collapse of Quadriga Fintech Solutions Corp. and its affiliates in March 2019 has been the most significant cryptoasset market intermediary in Canada to file for insolvency protection under the CCAA or BIA. Quadriga had been one of Canada’s largest cryptocurrency exchanges, with CAD 215 million owed to accountholders at the time creditor protection was sought. 

In Quadriga, the court noted that the BIA’s definition of “property” is broad enough to include cryptocurrency, and therefore a bankrupt’s cryptocurrency is property that is divisible amongst its creditors. The court also found that cryptocurrency claims are liquidated claims analogous to debts in a currency other than Canadian currency that should be valued as at the date of bankruptcy under the BIA. While the court did not determine whether cryptocurrency was a “security” or other specific type of asset, the court analogized the bankruptcy of Quadriga to the bankruptcy of a securities firm and noted that cryptocurrency could be analogized to a security.

In Autorité des marchés financiers c. Lacroix, 2018 QCCS 3062 (PlexCoin), the Superior Court of Québec dealt with companies involved in the solicitation of investments for the new cryptocurrency “PlexCoin”. This process took place outside the usual regimes of bankruptcy and restructuring using Québec securities legislation. At the request of the AMF, a receiver was appointed over the property of the principal and his related companies, including all BTC. Subsequently, the AMF obtained orders to allow the receiver to make a distribution to reimburse the investors in the PlexCoin project, and finally sanctioned a plan of distribution in favour of all of the principal’s creditors, including the allegedly defrauded investors in the cryptocurrency.

Canadian courts have also recognized two foreign cryptocurrency insolvencies pursuant to the insolvency recognition processes in the BIA and CCAA. First, MtGox Co. Ltd (Re), 2014 ONSC 5811, which recognized the Japanese insolvency proceeding as a foreign main proceeding, and second, In The Matter of Voyager Digital Ltd., 2022 ONSC 4553 (Voyager), which recognized the U.S. Chapter 11 proceeding of Voyager as foreign main proceedings, notwithstanding that the head office for Voyager was in Canada and its shares were listed on the Toronto Stock Exchange. In finding the centre of main interest of Voyager was in the U.S., the court noted that its entire cryptocurrency business was run out of the U.S. and it did not have any Canadian customers.


10 . Is a smart contract enforceable as a legal contract?

In Canada, there are no federal or provincial statutes, regulations or case law that have specifically addressed the extent to which a smart contract may be a legally enforceable contract. Consequently, the enforceability of a smart contract will likely depend on whether the smart contract exhibits the four elements of a contract at common law, specifically: offer, acceptance, consideration and capacity of the parties to understand the terms of the contract. 

Electronic contracts are generally recognized to have the same legal effects as contracts in print or in writing. Electronic commerce laws throughout Canada are intended to give effect to electronic contracts and such documents will be recognized to have the same legal effects. There is therefore good reason to believe that a smart contract that otherwise meets the certainties required for contracts will be enforceable, notwithstanding that it comes into existence through electronic means. 

Canadian courts routinely enforce click-wrap and other online agreements where a user manifests consent to the online agreement. While challenges exist concerning browse-wrap agreements, we do not believe these issues should serve as a deterrent to enforcing a smart contract if its terms are willingly consented to by properly informed users. However, the enforceability of such contracts will always be fact-specific and remain subject to legal doctrines affecting contract validity, such as unconscionability, fraud, or misrepresentation.

Electronic commerce laws in Canada generally recognize contracts entered into by electronic agents, as contemplated in the United Nations Model Law on Electronic Commerce and section 22 of the Uniform Electronic Commerce Act (Consolidation 2011) and within the boundaries prescribed by that model law.

The “Code is Law” doctrine was considered in the Ontario case of Cicada 137 LLC v. Medjedovic, 2022 ONSC 369 (Cicada 137). Cicada 137 is a civil action commenced against a 19-year-old math genius who exploited a vulnerability in a decentralized finance protocol to transfer ETH worth CAD 15 million into digital wallets he controlled. The defendant admitted to moving the ETH, but asserted that his actions were lawful: “he did no more than what the code allowed and the code is law”. However, the defendant refused to appear before the court and went into hiding in December 2021 after the court ordered for the disputed ETH to be deposited with a neutral custodian so that a fair hearing could proceed. While the defendant has moved the disputed ETH since being served with the preservation order, the warrant for his arrest is outstanding, and the merits of the “Code is Law” doctrine have yet to be considered by the court. 


11 . What recourse does a victim of crypto fraud have?

In proceedings alleging fraud or similar misconduct relating to cryptoassets, Canadian courts have granted equitable remedies for the purpose of preserving evidence and freezing cryptoasset accounts where the cryptoassets were the subject of the legal proceeding and other relevant tests for the remedy were met. 

In addition, the Québec Financial Markets Administrative Tribunal has ordered cryptoassets to be cease traded or frozen in the context of regulatory investigations of alleged illegal distributions of securities. In CreUnite, the Tribunal ordered for service of a cease trade order relating to a pending token pre-sale by a group that identified itself as a DAO through the CreUnite Facebook page and the AMF website. 

Preservation orders

Courts in Ontario and British Columbia have granted preservation orders relating to cryptoassets upon being satisfied that the common law test is met.

The terms of each preservation order required the defendants to produce relevant computer hardware for inspection and to transfer disputed cryptoassets to a third-party custodian for safekeeping while the claim proceeded in court on the merits. When considering the balance of convenience, the courts noted that cryptoassets can be easily moved or lost at great risk to the plaintiff and the preservation orders would cause little apparent harm to the defendants. As with any order, parties have the ability to apply for a variance of its terms. 

Anton Piller Orders

In two Ontario cases, the court granted an Anton Piller Order (also known as a civil search warrant) related to the preservation order to allow the plaintiff to search for and seize the cryptoassets that are the subject of the preservation order.

In Cicada 137, the Anton Piller Order allowed the plaintiff to seize the defendant’s laptop computer and other hardware devices for the purpose of locating passcodes to the defendant’s cryptoasset wallets which held CAD 15 million of ETH, alleged to have been stolen from the open-source Index Finance protocol. However, the defendant went into hiding and the plaintiff was unable to locate the passcodes on the seized devices. 

In Kirshenberg v. Schneider, 2023 ONSC 2809, the court appreciated the risk that the defendant could use his phone to transfer USD 350,000 of ETH that was to be preserved for the purpose of satisfying alleged settlement payment obligations to the plaintiff. While the court rejected the plaintiff’s proposal for the defendant to give sworn evidence in court on the day of execution of the order about his digital wallet passcode, it accepted the proposal for an independent solicitor to be present for the defendant’s phone call to confirm that the defendant was speaking to counsel. To protect the privilege of the conversation, the court ordered for the independent solicitor to wear noise-cancelling headphones after confirming that the call was with counsel. 

Mareva (freezing) Orders 

A Mareva Order is a pre-trial inunction that restrains a party in litigation from dissipating assets or removing assets from the jurisdiction. Distinct from a preservation order, a Mareva Order is an extraordinary remedy, which will be granted before judgement and only if the court is persuaded that the common law test is met. 

In Li et al. v. Barber et al., 2022 ONSC 1176 (Li v. Barber), the Ontario Superior Court of Justice issued a Mareva (i.e. a freezing) injunction in the context of a proposed class proceeding brought by Ottawa citizens against organizers, supporters and participants in the “Freedom Convoy” blockade of downtown Ottawa in protest of Canada’s COVID-19 restrictions. The injunction froze money and cryptoassets which had been donated to convoy organizers based on evidence that the organizers had promoted cryptoasset donations as a means of evading an earlier Criminal Code restraint order freezing donations made through an online funding platform. 

The Mareva injunction issued in Li v. Barber was a temporary measure issued at a time when the federal government had invoked the Emergencies Act (Canada) to address the security risks posed by the Freedom Convoy, whereas other applications for Mareva orders to freeze cryptoassets that are the subject of a civil claim have been rejected. Courts have held that the preservation order adequately address the risk that the cryptoassets at issue could be transferred out of the jurisdiction. 


12 . Are there any other ongoing legal or regulatory consultations or other legal frameworks in the pipeline relating to cryptoassets?

CSA: Alternative Regulatory Approaches for VRCAs

While the CSA took a hard line on stablecoins in CSA Staff Notice 21-333 CTPs: Terms and Conditions for Trading in VRCAs with Clients, they emphasized that the VRCA T&Cs are an “interim approach” and that they welcome submissions regarding the appropriate longer-term regulation of VRCAs that would address investor protection concerns, or alternative criteria for trading of other VRCAs by Dealer CTPs. 

Federal Department of Finance 

On November 3, 2022, the Department of Finance launched consultations with stakeholders on digital currencies, including cryptocurrencies, stablecoins, and central bank digital currencies. These consultations are part of the first phase of the Department of Finance’s financial sector legislative review focused on the digitalization of money and maintaining financial sector stability and security announced in the federal government’s 2022 Fall Economic Statement. No updates were provided in 2023.

Other 2023 Consultations

The following public consultations were held in 2023, but comment periods are now closed: 

  • Federal Office of the Superintendent of Financial Institutions (OSFI) draft guidelines on the regulatory capital treatment of cryptoasset exposures (one for deposit-taking institutions and one for insurers).
  • OSFI consultations on international recommendations related to stablecoins, specifically fiat-referenced cryptoassets pegged to a fiat currency.
  • Canadian AML Law “five year review” by committee of Parliament. 




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