Cryptocurrency is often referred to as unregulated or the Wild West but neither of these labels are accurate. Before getting into why it's wrong, what does regulation even mean? If we don't agree on what it means to be regulated vs. unregulated then there's no way to discuss whether cryptocurrency is the Wild West or not.

The Meaning Of Regulation In Canada

To a law professor friend of mine, regulation is any kind of rule that relates what the government says people have to do. This is a broader definition than most lawyers would use.

To lawyers in Ontario, regulation typically means secondary legislation, which is rules that are clearly written down but only within the authority of a law that has already been passed by the legislature (provincial or federal). A regulation is allowed to be created by a department of the executive part of the government, which is something like the Ministry of Education (Ontario) or Department of Finance (Canada). The government is allowed to create their own rules, without going to the legislature, because the law allows them that authority. But the regulations must be passed in a certain way, and usually follow a fairly standard approach to drafting which is unique to the jurisdiction (regulations in other countries look very different in form, even if they have the same substance). Typically they're published online in the same area as the statute that they draw their authority from, so that people can easily see what the rules are.

Regulations, within the meaning that lawyers use, are just one part of what the law is, and sometimes they're not even the most important part.

Different Understandings Of Regulation

In theory, it's easy to know what's a regulation because it's labelled as regulation. But for academics, and the general public, they see something much wider than what lawyers mean. They mean something that's often captured in the term regulatory landscape, the full scope of applicable law.

There are countless numbers of documents created by the government that aren't regulations (or statutes), but they are effectively the same because they explain the government's view of what their vague laws mean. If our statutes were clear, and the regulations were clear, there might be no need to this, or it would be of limited effect. But Canadian laws are often wide open to interpretation, and so lawyers, businesspeople, and the public, look to the pronouncements about what the law means.

Sometimes government pronouncements are official and organized into clear types, such as a legal instrument called an Order in Council. There are a many types of legal instruments (described later), but Orders in Council are an instructive example.

Unusual Forms Of Regulation

Orders in Council are often much less easily available than regulations because they have a lower status in the hierarchy of regulation. Examples can be found federally here: A range of other types of legal instruments can be found in what's called the Gazette (other UK-derived countries usually have this too). Here's an example Canada Gazette from a few days ago:

The Canada Gazette from December 4th (link above) contains a variety of items that someone might think of as regulation. Is it a regulation when the government publishes an investigation with their interpretation of the results? The first example in the Gazette sure looks like a rule, but it's technically not a regulation. Court decisions are also a part of the law, but are usually not considered to be regulations by lawyers.

Lawyers need to integrate the various kinds of administrative decisions, court decisions, guidance, and other interpretative aids issued by the government, but most of this wouldn't qualify as regulation. In some cases, press releases and speeches by government officials are a part of this wider world of regulation. Many American lawyers look to statements by US SEC Commissioners to understand the emerging views of the government about cryptocurrency issues, but none of the statements or speeches that Commissioners give have the force of law like a regulation does.

Explanatory Law

Often, administrative pronouncements come in the form of explanatory documents that provide colour to what the government regards as material or that they encourage businesses to do something. An example of this type of guidance is the steady stream of staff notices from Canada's provincial securities regulators, such as the 2019 document about reporting of climate change risks: In the 90,944 words of the Ontario Securities Act there is not a single mention of climate, which is not surprising given that securities market activities in Ontario are often about funding projects that damage the environment (e.g. oil sands developments). What is surprising is that the Ontario Securities Commission can issue a document that says within it that This notice does not create any new legal requirements or modify existing ones.. How can a 16 page document of various flow charts and explanations that's to improve their disclosure of [climate change] risks, not be a change of legal requirements?

OSC guidance documents are a good example of the fiction behind many types of government's legal documents that claim to not be a change in the law. Obviously they are, because lawyers, and the company's they advise, typically snap to attention as they're issued. Technically not regulations, and theoretically only an explanation of the government's thinking, like they're tipping their cards to you, but in reality, the interpretative notices are the law for most purposes. The government is very strong, and their choice of enforcement priorities is often a more real reflection of the law than the laws published online by the legislature.

In some cases, administrative documents aren't even published by the government, they're published by private organizations. There are many self-regulated organizations (i.e. businesses grouped together, such as securities dealers) in Canada that have power delegated to them by the government, such as IIROC. IIROC makes many rules for the investment industry that are effectively the same as regulations, because companies in that regulated area are required to follow what IIROC says to do, and it would be reasonable to view these rules as regulation, even though that's not typically what lawyers mean by the term regulation.

Enforcement As Law

Enforcement priorities are what business people want to know. They want to know if they'll get in trouble, since most laws in Canada aren't actually enforced by inspectors or private lawsuits. Or the enforcement is so sporadic that it can be effectively rounded to zero. For example, illegal dumping or killing endangered species is not really enforced in Ontario. Speeding is permitted if it's only a little bit. Operating a business under a trade name that's not registered is unlawful under the Business Names Act but the problem can be corrected by registering right before filing a lawsuit under that trade name. The foregoing is not a nuanced view of these laws (and certainly bad advice for anyone thinking of doing those activities) but everyone knows that in real life there are far more crimes and offences than there are police or litigation. Most people do the right thing regardless of punishment, but for people looking to know the bounds of what's legal, they care a lot about the true nature of enforcement.

Is the enforcement of laws that true reality of law? Or is the reality the written down rules? There are sometimes rules in Canada that written down but have been held by courts to be unconstitutional, so the text is actually wrong, and the real state of the law has to be found elsewhere. If something is never enforced, is it the law? Regulation by enforcement is very common in Canada. Typically it's framed as prioritization or resource constraints. Selective enforcement is so important to understanding the law that many parts of the government publish their plans for enforcement in advance! For example, the federal Competition Bureau's 2021-2022 Annual Plan describes the areas they're going to focus on, but is that regulation? Or is the regulation how they actually do it? Or is the regulation the law that empowers them to pick and choose between the cases? Or is it the law itself that they're enforcing?

Often lawyers are prohibited from telling clients about what sorts of laws can be broken with impunity (by professional rules, ethics, conscience, reputation, etc. - are these all regulation?). Or estimating the fines that will be received if the company is caught. But this is the area of greatest interest to people who want to know the rules of the game. People who drive the speed limit have to deal with people honking at them or giving them dirty looks. They also get to their destination slower. This issue translates to every other area of the law, in a dynamic game that involves everyone in Canada. But is the space of prohibited conduct all properly called regulation? If so, that includes human behaviour of a non-legal nature, like the ordinary rules of social conduct.

Different Ways Of Understanding Rules

Many ordinary rules of social conduct are actually enshrined in law. A lot of commercial law is about the good practices of good business sense, as evolved over centuries of trade. Other rules are an attempt to go against the grain by passing rules that are the opposite of what people want to do. In Canada, laws come in a wide variety and with a wide variety of purposes (sometimes not stated). Even the interpretations of the law by courts can depend on the type of law. Criminal laws, tax laws, and human rights laws are all interpreted with different frameworks that give the rules different meanings than they would have if they were interpreted under the general rules. For example, tax laws are generally interpreted against the government, human rights laws are generally interpreted in favour of sympathetic people, and criminal laws are interpreted with a different evidentiary standard than regular civil court.

Administrative Bodies

Most people are familiar with court decisions, but they're not usually considered by the legal profession to be regulation, even if they're essential to understanding the law. Similarly, there are many thousands of administrative boards in Canada that have taken over what would otherwise be the duty of courts. There's also municipal laws passed by cities, which are created by provincial laws. In Toronto there's an administrative body with very significant powers to determine permitted land use (with a big impact on condo tower values, etc.) that is an independent quasi-judicial tribunal established through the City of Toronto Act, City of Toronto Municipal Code Chapter 142 and provincial legislation. The array of administrative bodies is bewildering, and each of them are regularly issuing decisions that practitioners need to stay on top of in order to know what the law is at any given point. This is one of the reasons for the incredible specialization of the legal profession in modern Canada. Unfortunately, many of these decisions are not published online, and they're scattered across thousands of websites. In some cases, paid subscription products are necessary to read the decisions. All of this is regulation in the broad sense.

Technical Standards

Many laws require people to follow technical standards, and it woudl be reasonable to include these within the scope of what counts as regulation, even though technical standards are made by private organizations, many located outside of Canada. There's even a part of the federal government that employs over 100 people in the field of technical standards and how they apply to Canada. Many of these are mandatory to follow, and sometimes even require a fee to read, which is effectively a type of privatized law that is never even reviewed by the legislature. Are these regulation? Where the boundaries lie depends on the observer's view of what counts as regulation, and also the industry they operate in (because some rules, like technical standards, are only relevant to certain areas of conduct).

Cryptocurrency And The Wild West

In a country like Canada, with uncountable laws that apply to a huge swath of human activity, it's rare to truly find an area that's unregulated even in the strict sense of the word. In reality, regulations are much broader than most lawyers say they are. On this topic, I side with the academics and general public's broader conception of what the word properly means. But even looking more strictly at what is regulation as statutes + regulations + common law, it is clear that there's no Wild West left in Canada (and to the extent that there ever was, a lot of this is a myth - Canada had many laws in the 1800s too).

There are many rules of general application that apply no matter whether a purchase is done using cryptocurrency or Canadian Dollars. I've written elsewhere in this blog about the many areas of regulation relevant to cryptocurrency. There are laws about business conduct that apply to all businesses, and there are criminal rules against fraud, etc. that apply to everyone. There are also specific regulatory regimes like the PCMLTFA virtual currency dealer MSB regime, overseen by FINTRAC. If the word regulation includes social conduct rules, then there are even more rules that are applicable, and they're constantly in flux as norms evolve. Whether one looks at it expansively or narrowly, there's no shortage of regulation. For the businessperson looking for freedom from meddling rules, the typical business rules that apply to every business in Canada are already a substantial area of law that keeps thousands of lawyers employed in Ontario.