Canada is among one of the countries with the highest Bitcoin adoption rate. However, things were not always smooth sailing for the cryptocurrency.
With its progressive stance on technology, Canada has been one of the countries that places high in Bitcoin adoption and acceptance. Bitcoin has gone through various stages before reaching its current status as a recognized asset in this country.
Today, major retailers like Newegg and online platforms like Shopify accept Bitcoin payments. Bitcoin holders in some municipalities like the City of Richmond Hill can also use it to pay property taxes. The cryptocurrency can also be used in complete Bitcoin and crypto casinos in Canada.
However, things were not always this convenient for Bitcoin enthusiasts in the country.
How Bitcoin emerged in Canada
In Bitcoin’s early years, many tech enthusiasts in Canada started to experiment with the cryptocurrency. Still, Bitcoin faced a sceptical attitude among Canadian policymakers and financial institutions. Despite the lack of regulatory clarity, the first Canadian Bitcoin exchange VirtEx was established in 2011.
Bitcoin gained popularity in 2013, with the adoption rate increasing globally. As a security measure, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) released a guidance. It stated that Bitcoin businesses were subject to anti-money laundering (AML) and counter-terrorism financing (CTF) regulations.
The Bitcoin bull run of 2017 saw media coverage and public interest in Bitcoin soaring. This led to an increase in investments among Canadians who saw the currency as a speculative asset.
With the bull run, regulatory efforts intensified. Amended AML and CTF regulations now include cryptocurrency exchanges. According to professional services network KPMG, this had a cleansing effect on the industry.
As bad actors are removed from the scene, a path forward has been opened for cryptoasset adoption. A year later, institutional investors grew more interested in Bitcoin as an asset class. The launch of Bitcoin futures trading on the stock exchanges in big cities like Toronto further legitimized Bitcoin’s value.
Canada’s Bitcoin ecosystem matured from 2020 onwards. With improved regulatory clarity, more custodial services are providing investors with security. Institutions such as pension funds, asset managers, and enterprises saw that Bitcoin became part of their investment strategy.
The cryptocurrency now acts as a hedge against inflation and a portfolio diversification measure in the country.
Bitcoin’s adoption growth
According to a recent survey conducted by KPMG’s Digital Assets Centre of Excellence (CoE) and the Canadian Association of Alternative Strategies & Assets (CAASA), cryptoasset adoption increased in 2023. Crypto allocations increased among high-net-worth individuals and private equity organizations.
Furthermore, Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism attracted investors with environmental sustainability concerns. This mechanism reduces the computational power required to process and validate transactions.
Therefore, the electrical energy consumption is reduced to virtually zero. The 99.4 per cent reduction rate informed investors regarding cryptocurrency’s environmental improvement.
Now, investors are exploring multiple strategies in the crypto ecosystem. The average number of strategies employed to allocate crypto, KPMG said, was approximately 1-2 per investor.
In 2023, that average rose to 2-3. Direct ownership appears to be the most attractive, with a 28 per cent increase of ownership in cryptoasset derivatives.
Canada was the first country to allow spot-based Bitcoin exchange-traded funds (ETFs) for crypto.
Now, investors are also paying attention to the approved ETFs of the US Securities and Exchange Commission (SEC). With it, crypto assets are one step closer to being legitimized as an investible asset class in the world. This will signal other industry players that it is permissible to lawfully enter this space and benefit from it.
Major players like Coinbase, Anchorage, and Fidelity created their improved custody infrastructure. They now facilitate direct crypto asset ownership, coupled with compliance with recent regulations.
Custodians are held to a higher standard by fellow industry players and regulators. They will be required to document their policies and procedures through SOC2 reports. With it, crypto services are now offering higher risk management.
Looking ahead this year, KPMG expects institutional adoption to continue. With real-world assets (RWAs) offering high yields, its integration into centralized finance (CeFi) platforms and decentralized finance (DeFi) applications is expected to accelerate adoption.
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