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.

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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 a Coinbase 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.

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.”