CANADA NEEDS A FEDERAL DIGITAL ASSET TASKFORCE
The Canadian Anti-Fraud Centre reported $638 million in 2024 lost to fraud and cybercrime in Canada,[1] a steep upward trend from previous years. Civil litigation offers victims a shot at recovery, but the evolution of legislation and jurisprudence in this area has been outpaced by the proliferation of crypto fraud, which in our experience, increasingly integrates artificial intelligence to give the fraud a sense of legitimacy. Given the enormity of the crypto fraud problem in Canada, it is time that a federal taskforce be assembled to devise guidance documents for legislators, the judiciary and practitioners to accelerate the development of Canadian law in the crypto space.
The United Kingdom (“UK”) Ministry of Labour established the UK Jurisdiction Taskforce (“UKJT”)[2] in 2020 to clarify key questions regarding the legal status of, and basic legal principles applicable to crypto assets, distributed ledger technology, smart contracts and associated technologies under UK law. The UKJT has issued a number of “legal statements” in this field that have been cited with approval by English courts in answering questions regarding the nature of cryptocurrency as property,[3] and the taskforce’s work has resulted in legislative developments to streamline litigation in the crypto space, for example in carving out a new category through which a claimant can serve non-parties outside of the jurisdiction with a claim for an information (Norwich) order.[4]
While various Canadian authorities have published guidance on discrete crypto-related issues, such as the Canada Revenue Agency[5] and the Canadian Securities Administrators,[6] Canada does not have a cohesive body akin to the UKJT to tackle broader legal questions that have yet to be answered in the Canadian crypto space. This body could build upon the work of the UKJT in developing Canada-specific guidance documents on subjects such as:
- Characterization of crypto assets as property and the situs of these assets;
- Amendments to court rules to allow service of a Norwich application on foreign third parties without establishing a real and substantial connecting factor, such as carrying on business in Canada;
- Amendments to court rules to allow for longer return hearing times for motions for injunctions made without notice,[7] for example for Mareva motions, to allow for a longer without-notice window to effect a freeze of crypto accounts;
- The jurisdiction of Sheriff offices with respect to enforcing against a debtor for crypto assets rightfully belonging to a creditor within the Sheriff’s jurisdiction, and whether jurisdiction is established according to residence of creditor or debtor;
- Payment into Canadian courts of crypto assets for the sake of security for costs or as an interim step in recovery of funds; and
- Better clarity on tax treatment of crypto assets and treatment upon insolvency or death.
While legislative amendments in respect of the above may take some time, educating legal professionals and decision makers with respect to the basics of crypto assets and the progress made by other jurisdictions such as the UK could go a long way in accelerating development of the Canadian legal landscape respecting crypto assets and potentially reduce the cost, complexity and the amount of time victims must endure until recovery.
[1] March 13, 2025 Royal Canadian Mounted Police article “The cost of fraud exceeds financial loss, victims say.”
[3] Tulip Trading Ltd v Bitcoin Association BSV, [2022] EWHC 667 at para. 16.
[4] United Kingdom’s Practice Direction 6B – Service Out of the Jurisdiction, section 3.1(25).
[5] December 13, 2023 Canada Revenue Agency guidance document “Information for crypto-asset users and tax professionals.”
[6] June 11, 2018 Canadian Securities Administrators Staff Notice 46-308 – Securities Law Implications for Offerings of Tokens.
[7] See for example, Rule 40.02 of the Ontario Rules of Civil Procedure, R.R.O. 1990, Reg. 194, currently under the Rules a maximum of 20 days is afforded.
