We’re nowhere close to market saturation.
Global opportunities for crypto are wide open, and the Canadian market offers some significant opportunities for exchanges looking to grow revenue by tapping into a fresh user base – if they’re ready for competition and they’re prepared to operate in a compliant environment.
Massive opportunity for crypto investors
What’s the primary opportunity? More revenue fueled by increased cryptocurrency adoption.
According to a 2020 study, it’s “estimated that 1.2 million people, 3.2% of Canada’s total population” own cryptocurrency, and as of April 2021, crypto ETFs were showing incredible trading numbers. With 96% of the population yet to adopt, early-moving investors and exchanges have an obvious opportunity. And from a political and economic perspective, Canada’s conservative party seems all in favor of increased adoption with Pierre Poilievre’s election as Conservative Party leader, a welcome sign for crypto exchanges in Canada, wallets, and users alike.
Several exchanges are already operating in Canada (Coinbase, Binance, and Kraken to name a few), but a notable new entry is behemoth Crypto.com. In August 2022, the exchange announced the Ontario Securities Commission (OSC) accepted their pre-registration for operating in Canada, and with Coinsquare’s September 22nd acquisition of Coinsmart, opportunities for crypto exchanges in Canada are looking more and more positive.
And while some early adopters and investors are inherently risky and opt for entries into less organized markets, that’s not the kind of environment the US’s neighbor to the north is creating with its stance on crypto. It turns out that what’s actually more attractive to many crypto investors is a strong regulatory environment, and Canada’s strong stance on compliance and regulation is attracting international interest.
There are still a lot of people yet to adopt crypto in Canada. The question is how long other exchanges will wait to take advantage of these opportunities while also positioning their offerings to line up with Canada’s stance on crypto regulations.
Challenges for the Canadian crypto market
Every market opportunity comes with its own unique sets of challenges, and Canada’s crypto market is no different.
Corruption is one factor, and has been an unwelcome specter in Canada with “cryptocurrency fraud losses totalling $75 million” in 2021; not to mention the QuadrigaCX debacle.
Additionally, Canada faces the same kinds of regulatory challenges exchanges and users face in jurisdictions across the globe. Increased regulation and compliance expectations, while stabilizing, prove challenging for exchanges as they navigate scrutiny from investors, users, and jurisdictions alike.
And global competition among exchanges is fierce. With over 400 exchanges operating in over 125 countries, gaining and maintaining market share while maintaining profitability is becoming even more difficult.
Here are a few factors that come into play:
- As of today, there has been no comprehensive solution for identifying cost basis and subsequent gains/losses across multiple platforms for crypto transactions.
- Transactions and transfers are not being distinguished between taxable and nontaxable events, resulting in inaccurate (manual) calculations of gains and losses – a nightmare for tax authorities and certainly no fun for crypto users who are expecting more and more from exchanges.
- In the end, exchanges can’t report, tax authorities can’t collect revenue on gains or effectively conduct audits (they’re trusting people to self-report), and a lack of regulation leads many jurisdictions to ban crypto altogether, stifling adoption and tech advancement.
Crypto exchanges in Canada that can offer automated tax support stand to win over their competitors – that is if they can find a scalable method for delivering compliance solutions for users and tax authorities.
Find the right crypto tax partner
It’s now non-negotiable; exchanges must comply, and users are starting to factor tax reporting into their decision making process.
BlockSentry, a leading crypto tax software provider, offers accurate third-party verification solutions for exchanges and users. Exchanges and users get access to automatic tax form generation and powerful software that auto-syncs with exchanges and wallets, imports trade histories, ICO’s, airdrops, forks, mining, payments, and even lost/stolen cryptocurrency.
Learn more about BlockSentry or schedule a demo to see it in action.