FINTECH BLOG

The Week that was in Fintech, Blockchain, and Cryptocurrency

Ontario Securities Commission launches cryptoasset educational initiatives for Financial Literacy Month

 On Thursday, November 1, 2018, the Ontario Securities Commission (“OSC”) launched two cryptoasset educational initiatives as part of its activities for Financial Literacy Month.

GetSmarterAboutCrypto.ca provides an overview of cryptoasset services and products, the OSC’s role in regulation, and tips for investors to exercise due diligence. The regulator says that the move to provide more information to the public regarding cryptocurrencies stems from their growing popularity among Canadian retail investors.

Research published by the OSC in June 2018 found that five percent of Ontario adults, translating to roughly 500,000 Ontarians, own cryptoassets, with half of this group spending $1,000 or more on purchasing these products. The research also suggested that men aged 18-24 are three times more likely to report owning cryptoassets than other demographic groups.

TBACoin.ca has been created by the OSC as a fake ICO website meant to mimic a typical fraudulent initial coin offering (ICO). The website is intended to help investors interested in ICOs identify potential red flags.

HTC launching the first Blockchain phone

Taiwanese smartphone manufacturer HTC is poised to usher in the first blockchain smartphone, “Exodus 1”. The Exodus 1 promises a secure enclave, a locked area on the device isolated and protected from the wider Android OS, which will serve as cold storage.

The company says the enclave can store the keys for cryptocurrencies or non-fungible tokens (NFTs), such as those used by CrytopKitties. HTC also says that users will be able to store all their digital data on the secure enclave in the near future. Phil Chen, HTC’s decentralized chief officer, told CNBC “It basically is a wallet, but the wallet, what it does is hold your private keys”.

Keen to get a hold of one? Exodus 1 is expected to ship in December, however, the handset can only be purchased with Bitcoin (BTC) or Ethereum (ETH). The phone will be available in 34 countries, including Canada, the United States, and Australia. The device retails for 0.15 BTC (about $1,255.87 CAD) or 4.78 ETH (about $1275.30 CAD).

Brazilian Tax Regulator Publishes Draft on Cryptocurrency Taxation

The Department of Federal Revenue of Brazil (“RFB”), which administers tax collection in the country, is seeking to receive monthly reports on Crypto assets operations, according to a paper (in Portuguese) released by the RFB on Tuesday, October  30. The RFB noted that the measures are being taken due to the significant growth of the crypto industry in the country.

In the paper, the RFB announced that Brazil-based crypto exchanges must send detailed reports on all crypto-related operations monthly, including the amounts of certain transactions and customer information. Furthermore, legal entities and individuals living in Brazil must report all the transactions they have carried out at foreign crypto exchanges if they surpass $10,000 Brazilian reals (approximately $3,500 CAD) per month. Those who fail to report their transactions face a range of fines.

The Role of “Stable Coins”

A new class of cryptocurrency is gaining momentum among cryptocurrency pundits. In contrast to currencies such as Bitcoin, whose prices were intended to experience fluctuation, the new class of cryptocurrencies, “stablecoins”, aim to maintain a stable price: $1 USD.

Stablecoins may potentially address the issue faced by fluctuating cryptocurrencies: while fluctuating cryptocurrencies, such as Bitcoin, were created to be used to purchase real-world goods and services, in reality, their volatility prevented widespread consumer use. Consequently, their utility as a medium of exchange is questionable. Stablecoins aim to bridge the gap between physical and digital currency. Due to their stability, some in the crypto industry see the rise of stablecoins as an opportunity to achieve the promise of a medium of exchange that Bitcoin has presently failed to deliver upon.

Recently many Stablecoin projects have been launched or announced, including Paxos, Havven, and Dai.

Balaji Srinivasan, the Chief Technology Officer of Coinbase, one of the United States most prominent exchanges, said stablecoins “make possible payments that are very small, very fast, very large, very international, very transparent and very automated.”

Canadian Firms Ranked as Global Fintech Innovators

Canadian fintech firms Wealthsimple and League were ranked among the world’s leading fintech innovators, in a recent ranking published by KPMG and fintech investment firm H2 Ventures. The 2018 Fintech 100 assessed firms based on their capital raising activity, as well as their geographic and sectoral diversity.

Wealthsimple, an online investment management service from Toronto with the tagline “Investing on Autopilot”, ranked 25th. The company’s offerings strive to automate and simplify investing for the largely-millennial target market.

League is a digital health benefits platform that offers employees mobile access to spending accounts, wellness accounts, and group insurance plans. Also from Toronto, League placed 39th in this year’s ranking.

The top spot went to China’s Ant Financial (formerly known as “Alipay”). Valued at US$150 billion, the company is dedicated to using cutting-edge technologies such as AI, blockchain, and the Internet of Things to serve the unbanked and underbanked.

About the Authors

KELLY SAMUELS
Kelly Samuels, partner, brings a knowledge of business law to the rapidly growing fintech sector.
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FRASER HARTLEY EKB Fintech Author

FRASER HARTLEY
Fraser Hartley, partner, is focused on financing + technology, and helping the businesses that bring the two together.
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riley lelonde ekb fintech author

RILEY LALONDE
Riley Lalonde, associate, assists clients with a variety of business law matters while keeping an eye on developments in the fintech sector.
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