Last
March,
U.S.-based
cryptocurrency
exchange
Coinbase
expanded
its
footprint
north
of
the
border,
hanging
its
shingle
in
Canada.
The
move,
part
of
the
largest
U.S.
crypto
exhange’s
efforts
to
increase
its
international
presence,
could
be
a
signal
of
its
challenges
and
opportunities
abroad.
“It’s
a
natural
extension
of
the
spot
market
and
an
opportunity
for
the
ecosystem
to
introduce
products
and
services
using
digital
assets
that
are
efficient
and
trusted,”
Lucas
Matheson,
Coinbase
Canada’s
country
director,
told
CoinDesk
in
an
interview.
This
is
an
excerpt
from
The
Node
newsletter,
a
daily
roundup
of
the
most
pivotal
crypto
news
on
CoinDesk
and
beyond.
You
can
subscribe
to
get
the
full
newsletter
here.
In
many
ways,
what
Coinbase
does
in
Canada
might
prefigure
moves
in
the
U.S.
and
the
rest
of
the
world.
Canada
is
ahead
of
many
regions
in
terms
of
regulatory
clarity,
Matheson
said,
especially
in
light
of
the
U.S.
Securities
and
Exchange
Commission’s
(SEC)
attempts
to
restrict
the
growth
of
crypto
markets
and
separate
the
digital
asset
ecosystem
from
the
wider
economy.
But
Canada’s
regulatory
apparatus,
while
more
streamlined,
is
also
arguably
more
conservative.
“We
have
been
fairly
privileged
here
to
see
regulators
working
to
build
a
framework
that
can
really
be
set
up
as
a
global
standard
around
the
world,”
Matheson
said.
Coinbase
is
in
the
process
of
applying
for
its
“restricted
dealer
registration,”
a
new
type
of
guideline
that
requires
exchanges
to
register
with
the
Canadian
government.
This
is
especially
significant
given
Coinbase’s
financial
predicament:
While
Coinbase
has
been
able
to
significantly
diversify
revenue
streams
in
recent
years
—
like
the
introduction
of
a
prime
brokerage
unit,
the
Base
layer
2
blockchain
and
staking
and
custody
services,
including
for
many
bitcoin
exchange-traded
fund
(ETF)
providers
in
the
U.S.
—
it
still
derives
the
vast
majority
of
its
profits
from
trading
fees.
In
other
words,
unless
Coinbase
can
develop
new
business
interests
that
can
succeed
outside
of
largely
unpredictable
crypto
price
cycles
(that
draw
people
in
when
crypto
is
riding
high
and
force
the
exchange
to
slim
down
when
volumes
crater),
it
will
be
a
slave
to
market
forces
forever.
And
so,
the
moves
it
makes
in
Canada
could
indicate
what’s
to
come
elsewhere.
“The
principles
of
regulation
in
Canada
allow
companies
to
introduce
new
products
and
services,”
Matheson
said.
In
particular,
Coinbase
is
looking
to
launch
perpetual
futures
contracts
and
other
derivatives
products
in
Canada,
and
is
in
open
dialogue
with
politicians
and
regulators
like
the
Ontario
Securities
Commission
(OSC)
about
updating
the
country’s
policies
to
make
it
happen.
To
that
end,
Coinbase
recently
joined
the
Canadian
Web3
Council,
a
multi-party
non-profit
organization
that’s
looking
to
loosen
up
recent
legislative
and
regulatory
initiatives
in
Canada
that
are
currently
driving
crypto
companies
out
of
the
country.
In
recent
months,
for
instance,
a
number
of
exchanges
have
decided
to
pull
out
of
Canada,
including
Binance,
Bybit,
dYdX,
OKX,
Paxos
and
Bittrex
(the
last
of
which
has
since
declared
bankruptcy),
in
direct
response
to
“recent
regulatory
developments.”
Under
the
Canadian
Securities
Administrators’
newly
enacted
“pre-registration
undertakings,”
firms
must
now
segregate
crypto
custody
from
trading
platforms,
limit
leveraged
trading
and
hire
compliance
staff
including
a
chief
compliance
officer.
The
country
has
also
fenced
off
stablecoins
–
including
severe
restrictions
on
“algorithmic”
stablecoins,
which
counts
assets
like
Maker’s
dai
(DAI)
under
its
definition.
You
might
be
wondering
whether
Canada
is
even
worth
the
trouble,
given
the
limited
market
opportunity
(about
35
million
adults)
and
bespoke
rules.
When
Coinbase
Canada
officially
launched
last
year
(the
company
previously
had
a
presence
in
the
country),
its
announcement
noted
Canada
is
the
third
most
“crypto
aware”
country
in
the
world,
according
to
an
OSC
survey,
which
doesn’t
exactly
translate
into
trading
fee
revenues.
For
Matheson,
the
opportunities
are
less
abstract:
Canada
presents
something
of
a
sandbox
to
trial
new
products,
which
may
eventually
come
to
the
U.S.
or
E.U.,
as
well
as
approaches
at
convincing
skeptical
regulators.
“We’re
working
with
our
industry
partners
like
the
Web3
Council
and
regulators
to
explore
a
path
forward
to
bring
derivatives
and
leverage
products
for
both
the
retail
and
institutional
market
in
Canada,”
he
said.
And
Matheson
thinks
there’s
a
good
shot
at
making
it
happen
given
the
country’s
history
of
financial
innovation.
For
instance,
Canada
frontran
the
U.S.
in
launching
not
only
the
world’s
first
spot
market
bitcoin
ETF
—
with
the
Purpose
Bitcoin
ETF
in
February
2021
—
but
the
first
ever
ETF,
full
stop,
on
the
Toronto
Stock
Exchange
in
1990,
three
years
before
something
similar
hit
the
U.S.
Ahead
of
the
U.S.
ETF
approvals
in
January
of
this
year,
Eric
Balchunas,
a
leading
ETF
analyst
at
Bloomberg
Intelligence,
looked
at
the
ETF
market
in
Canada
as
a
proxy
to
better
understand
the
economic
opportunity
in
the
U.S.
By
the
end
of
2023,
crypto
ETFs
in
Canada
accounted
for
nearly
50%
of
the
global
spot
crypto
ETFs’
total
assets
under
management.
That
said,
the
U.S.
ETF
market
is
32x
larger
than
Canada’s,
while
the
total
crypto
market
opportunity
in
Canada
is
valued
only
slightly
above
$1
billion.
Coinbase’s
longtime
competitors
Kraken
and
Gemini
have
also
decided
to
double
down
on
Canada.
Still,
even
in
Canada,
crypto
adoption
is
an
uphill
battle.
Matheson
noted
that,
at
most,
only
13%
of
the
population
uses
crypto.
After
all,
like
the
U.S.,
Canada
has
a
developed
banking
and
financial
services
industry,
meaning
the
retail
customers
don’t
need
some
of
the
services
that
crypto
currently
offers.
This
might
seem
like
an
opportunity
for
greater
institutional
adoption,
but
even
that
is
predicated
on
customers
first
seeing
the
need
to
deal
in
crypto..
“What’s
interesting
and
fairly
unique
about
Canada
is
that
we
don’t
have
a
strong
political
vision
for
how
digital
assets
are
going
to
help
our
economy
in
Canada,”
Matheson,
a
true-blue
crypto
believer
said.
“And
so
one
of
the
things
that
our
whole
industry
has
been
working
really
hard
on
is
how
do
we
educate
our
government
officials
and
demystify
some
of
the
myths
and
misunderstandings
about
the
digital
economy.”