MONTHLY NAFTA UPDATE:
FRIDAY, AUGUST 31st: NAFTA 2.0 D DAY
Canadian Prime Minister Justin Trudeau in a press conference on Wednesday, August 29th, 2018 stated the possibility of reaching a deal on NAFTA 2.0 by the end of the week, if it is deemed a good deal for Canada. This announcement comes just days before President Trump’s Friday, August 31st, 2018 deadline.
Unfortunately for Canada, Mexico and the United States were able to reach a bi-lateral agreement earlier this week that gave ground on several of Canada’s top issues. One key issue remaining is Canada’s long-standing supply management system, which heavily subsidizes and protects the country’s dairy market to the dismay of US farmers. It is rumored that Canada may increase access to dairy markets for US farmers in exchange for the preservation of the dispute-resolution mechanism.
An agreement on NAFTA 2.0 couldn’t come sooner for NAFTA professionals across North America concerned for the status of their professional visas. Of particular concern is the status of working groups and the appendix (16.03.D.1) list of professionals from the 1990’s which includes professionals such as lawyers, engineers, and architects. Unfortunately, this list has since become rather dated, with professions such as ‘computer system analyst’ becoming obsolete because of automation. This renders it difficult for professionals, and their immigration lawyers, to fit their current job titles within the outdated list. It also leaves too much discretionary power for Border officers reviewing applications to both the United States and Canada. For example, ‘management consultants’ are notoriously getting rejected left, right and center as reported by members of the Canada-US immigration law community. Véronique Malka, CKR Law’s mobility expert and Co-Chair of the Global Mobility Group has long been a proponent of updating the list of professions. Ideally, NAFTA 2.0 will address the mobility of NAFTA professionals, not just trade issues.
Please continue to subscribe to our monthly newsflash as we continue to further report on NAFTA developments effecting cross-border trade and mobility.
Northern Crypto Opportunities: Canada as Choice Investment & Mobility Destination for Blockchain Tech Startups
Why are so many Blockchain technology startups looking to Canada? Strategic advantages abound, including Canada’s sandbox regulatory regime and cheaper business start-up costs. This article goes over some of the distinct benefits of Canada’s blockchain industry, for those looking north to expansion.
Blockchain, the technology behind the new cryptocurrency called Bitcoin, is a peer-to-peer decentralized network allowing for increased accuracy and transparency in ledger transactions. Each party can individually access the full ledger history and verify the transaction for accountability purposes, without the need for an intermediary or central authority (such as a bank). Many say that Blockchain is the future of the financial and monetary industry.
How Canada is Famous for Blockchain
The City of Waterloo, Ontario, has become renown in Canada for the tech start-ups locating themselves in the area. Waterlook first became known as the inaugural site of Blackberry in its prime, and now continues to be known as the Silicon Valley of the north. Furthermore, Silicon Valley in the U.S.A. has been poaching University of Waterloo engineering and computer sciences graduates; the school has a world-renowned reputation in the tech sector.
Few realize that Canada is home to Ethereum Blockchain, a second-generation platform combining blockchain technology with smart contracts. It’s founder, Vitalik Buterin, lives in Toronto, Ontario, adding to the North’s dominance in blockchain technology and adding legitimacy to the Waterloo-Toronto tech corridor. Ethereum’s company value recently surpassed $1 billion and its presence is bolstering the corridor’s venture capital tech ecosystem, making it easier for other Canadian start-ups to access funds.
The Canadian market offers a low cost to list on the Toronto Stock Exchange (TSX) in comparison to the New York Stock Exchange (NYSE), the Nasdaq Stock Market, or a regional exchange. Start-ups lacking large upfront equity that are going public should consider moving north for that reason, in addition to the lower annual fees offered by TSX.
Canadian securities exchanges are sharply adapting to Blockchain technology: In February 2018, the Canadian Securities Exchange (CSE) announced it would launch a securities clearing and settlement platform based on Ethereum Blockchain technology. Companies using this platform can issue Security Token Offerings (STO) to raise capital while in turn, they will be subject to regulation by the applicable provincial securities regulator.
The Canada-USA Regulatory Framework
As innovative and revolutionary as Blockchain may be, its regulatory framework lags far behind. The current lack of guidance from the Securities Exchange Commission (SEC) in the USA regarding cryptocurrency is stifling investment. Major players, like Barclays and JP Morgan, are rumored to be launching their own ICO’s, but the lack of certainty has halted Wall Street’s mainstream adoption of cryptocurrency, with trillions in available funds currently sidelined.
The biggest issue, in both Canada and the United States, remains whether cryptocurrencies, in particular, utility tokens, should be considered securities. This often arises in the context of a blockchain startup selling a token to raise capital for a platform that has yet to exist. Unlike the USA, which has a federal securities commission, provinces in Canada are responsible for securities regulation and control.
The Canadian Securities Administrators (CSA) is an umbrella group that harmonizes policy among Canada’s provincial and territorial regulators. The CSA has provided a guide for whether an initial coin offering (ICO) or initial token offering (ITO) would fall under provincial securities laws in the form of “CSA Staff Notice 46-307 Cryptocurrency Offerings.” Fortunately, the CSA has adopted the SEC’s posture using the Howey test to decipher whether cryptocurrency is, in fact, a security subject to its regulation, thus harmonizing North American standards (SCC Pacific Coast Coin Exchange v. Ontario Securities Commission 1970). The Howey test is a four-part test which defines what qualifies as an investment contract, thus if the ICO/ITO passes the Howey test the offering is a security subject to that jurisdictions securities regulator (SEC v. W.J. Howey Co).
Every security in the United States must be registered with the SEC or sold through an exemption. The same regime is replicated in every province and territory in Canada, where each security must be registered with the provincial authority or authorized under an exemption. In both countries, startups must be very careful in the ICO marketing and white papers to avoid referring to their token as an “investment” or a synonym (ex. gain, promise) as this would likely trigger a positive outcome running the Howey test. However, the SEC to date has come down much harder than Canadian regulatory authorities on non-compliant ICO’s, often killing them in their tracks.
Canada has taken a divergent approach from the USA with the CSA launching the Regulatory Sandbox Initiative in February 2017. This initiative allows for enhanced communication between regulators and startups to ensure provincial securities compliance. Ventures apply to have their products tested in the Canadian market while the CSA safeguards investors, an initiative which makes moving to Canada advantageous when compared to the stringent SEC regime. With regard to the Waterloo-Toronto tech corridor, the Ontario Securities Commission (OSC) has stated that cryptocurrency and blockchain developments will be a key area of focus this upcoming year, with regulatory improvements likely to follow.
Getting Qualified Blockchain Legal Advice in the USA and Canada
Some startups have taken the stance that the uncertain US regulatory framework allows for creative opportunities to classify as a utility token. However, take the cautionary tale of failed startup Munchee; Munchee was a highly anticipated blockchain token attempting to launch their own currency for restaurant reviews which they classified as a utility token rather than a security. In December 2017, Munchee raised $15 million from 40 investors the first day of their ICO and had to return it all the very next day when they received a cease and desist letter from the SEC disagreeing with their classification.
Blockchain startups should seek legal counsel to ensure they have a proactive, rather than reactive, legal strategy. They need to worry about whether their proposal can be classified as a security rather than a utility token. The Blockchain lawyers at CKR Law LLP highly recommend that an attorney review your ITO’s/ICO’s white paper to assess how likely it is that the proposal will be considered a security. Unfortunately, once the SEC has your startup on their radar for a violation, it’s often too late.
The SEC regulations and CSA policies have potentially far-reaching consequences with regard to jurisdiction. Even for startups that are not owned by Americans, if part of the business is located in the United States, or employees must visit often, they can easily become entangled by these regulations. With regard to Canadian regulations, the aforementioned CSA notice suggests that Canadian securities law applies if the ITO/ICO involves Canadian investors or if business is conducted in Canada. If in doubt, speak to a trusted advisor about your jurisdictional concerns.
Options on Opening a Crypto Business in Canada
Explore the Startup Visa: Canada launched a new immigration path for start-ups, providing a possible permanent resident visa for those with new businesses being set up in Canada. This program provides a much-needed immigration avenue for blockchain startups interested in moving north and sending their personnel to live in Canada permanently. Conditions regarding minimum investments and share value apply; speak to a trusted corporate advisor to learn whether you are eligible.
Open up in British Colombia: This province (BC) does not require residency for their corporate directors; thus a branch of an existing company abroad may only need to register to conduct business in a particular province without having to incorporate. Additionally, BC is leading the nation in startup and entrepreneurial activity, with the Business Development Bank of Canada (BDC) referring to BC as a ‘hot spot’ for start-ups. With all the recent business activity, this may be an ideal location for permanent residency for Startup Visa & provincial Investment Visa candidates.
Quebec: Cryptocurrency mining has become increasingly popular in the Province of Quebec since the cryptocurrency Bull Run at the end of 2017. Successful cryptocurrency mining is a function of competition (how many other miners are attempting to solve the algorithm at the same time) and electricity prices. The latter depends on electricity prices in the province as well as the temperature year round. Quebec is emerging as a cryptocurrency mining ‘goldmine’, attracting Chinese investors who are wise to take advantage of the fact that Quebec has about 1/3rd of the electricity prices of Ontario, affordable high-speed internet and has cold temperatures throughout most of the year.
Ontario: Take advantage of the ‘Waterloo-Toronto corridor’ or ‘Waterloo-Toronto-Ottawa tech triangle’ by settling in the region. Start with a student-visa and take advantage of the tech-oriented universities and blockchain employment opportunities thriving in the region. Consider temporary and then, later on, more permanent residency options with a trusted immigration advisor.
Consider BlockPresent: Your mobility advisor can help you prepare a Business Plan using Blockchain tech to be presented to VCs and Angel Investors in Canada. Given the popularity and welcome of Crypto business in Canada, the project might get picked up and funded, opening the door to permanent residence in Canada.
N.B. On August 22, 2019, the SEC rejected 9 Bitcoin ETF applications from three different applications, including the long-anticipated Direxion proposal (delayed from this winter). The SEC cited concerns that the ETFs were not safe from fraud or price manipulation. One day later, the SEC announced they would review the decision of their staff. CKR Law is closely monitoring the situation and its influence on market prices for cryptocurrencies.
CKR Law Canada: Entrepreneur/Investor Series
High-income individuals have different and unique needs than your average applicant for immigration to Canada. If you own a business and want to expand to Canada, then this is the blog series for you. Most provinces in Canada have an entrepreneur visa, save the exception of Alberta, with similar hallmarks. Most provinces have age restrictions and require a minimum education level (typically a Canadian high school diploma or equivalent), adequate French or English language skills (CLB 5+), a verifiable net worth of about CAD $600,000, and relevant working experience.
Each month, CKR Law will highlight a province of the month and detail the eligibility requirements for most of Canada’s 13 provinces and territories. Speak to a trusted advisor at CKR Law to determine if you are eligible for your chosen province.
Canadian Province of the Month: New Brunswick
New Brunswick is one of three Maritime provinces located on the East Coast of Canada. Its Capital city is Fredericton, and largest metro hub is the city of Moncton. The city of St. John’s is one of the busiest shipping ports of Canada and boasts a fast-growing IT sector. Population is under 1,000,000 people and its GDP is about $42,000 per capita. It is a more rural environment, but city life is there if you need it. Education is excellent, yet inexpensive, with top schools like the University of New Brunswick, Université of Moncton, Mount Allison University, and St Thomas University. Its main export destination is the USA, with over $1.6 billion, half of it being lobster!
The Province has an Entrepreneurial Immigration Stream, developed with experienced business owners and senior managers in mind. It requires those applying for permanent residence to own a business and manage it in the province, all while residing in the province. So if you want to run a Canadian business from outside Canada, this is not the province for you.
If you think New Brunswick may work for your business, or to find out more about Provincial Investment programs, please contact firstname.lastname@example.org.
Expediting Travel to Canada for Chinese Travelers
The IRCC has introduced a number of recent changes that will facilitate travel to Canada for Chinese travelers, including Chinese investors. 2018 is the Canada-China Year of Tourism because of the record number of applications processed in China this year. Chinese residents made up 23% of all TRV applications received in 2017 while Chinese residents have enjoyed a TRV application approval rating of over 88.5% since 2015. The changes discussed in this post will facilitate two-way flow between both countries solidifying economic and cultural ties, in 2018 and beyond.
Two Chinese airlines, China Eastern Airlines and Xiamen Air, as well as the Pierre Elliot Trudeau Airport in Montreal, were added to the China Transit Program. The China Transit Program allows for visa-exempt transit for eligible Chinese travelers through Canada for candidates heading to and from the United States.
Regarding payment options, Union Pay is now available for online applications for Chinese travelers. Union Pay is one of the largest and most popular payment providers in China so this will expedite payments for visa applications. Additionally, the IRCC is testing a new pilot program on temporary visa applications from China. This program uses computer analytics to process routine and straightforward applications expeditiously, allowing officers to focus on the more complex applications.
The IRCC has also opened up 7 new Visa Application Centers (VACs) across China (Chengdu, Hangzhou, Jinan, Kunming, Nanjing, Shenyang and Wuhan), which is a substantial increase, as there were only 5 locations originally (Beijing, Chongqing, Shanghai, Guangzhou and Hong Kong).
Last but not least, the IRCC also rolled out the Student Direct Stream study permit earlier this year which will expedite applications. For more detailed info, please visit the CKR Law June blog post here.
Interested in immigrating to Canada from China? CKR Law’s Global Mobility Co-Chair, Véronique Malka, would be happy to assist you and can be reached at: email@example.com.