Author(s)

ShuYu Zhou, ZhaoXia Deng^*

Affiliation(s)

School of English for International Business, Guangdong University of Foreign Studies (GDUFS), Guangzhou 510515, Guangdong, China.

Corresponding Author

ZhaoXia Deng

ABSTRACT

Canada's trust law is caught in a structural crisis, torn between the rigid formalism of common law and the need for adaptive governance in a digitalized global economy. Drawing on Frederick Schauer's theory of "rules as exclusionary reasons" and Douglass North's concept of "path dependence," this paper argues that Canada's regulatory framework—exemplified by Section 122 of the Income Tax Act and Section 56 of the Ontario Securities Act -  prioritizes procedural compliance over substantive resilience, leading to systemic failures such as the collapse of Penn West Petroleum Trust and the judicial rejection of cryptocurrency trusts in QuadrigaCX. Through case studies and comparative analysis, we demonstrate how Canada's adherence to outdated doctrines undermines both domestic stability and international alignment with OECD standards. We propose a dual-track solution: legislative modernization through a Uniform Digital Trust Act and the integration of blockchain-based smart contracts (e.g., ERC-1400) to encode fiduciary duties into programmable legal structures. This approach not only resolves the Schauer-North paradox but also positions Canada as a leader in responsive, technology-driven trust governance.

KEYWORDS

Canadian trust law; Fiduciary crisis; Legal formalism; Path dependence, Blockchain governance

CITE THIS PAPER

ShuYu Zhou, ZhaoXia Deng. Code versus precedent: blockchain-driven governance as a response to the crisis of trusts in modern Canadian finance. Journal of Trends in Financial and Economics. 2025, 2(3): 80-86. DOI: https://doi.org/10.61784/jtfe3058.

REFERENCES

[1] Frederick Schauer. Playing by the Rules: A Philosophical Examination of Rule-Based Decision-Making in Law and in Life. Oxford: Oxford University Press, UK. 1993. DOI: https://doi.org/10.1093/acprof:oso/9780198258315.001.0001.

[2] Douglass C North. Institutions, Institutional Change and Economic Performance. Cambridge: Cambridge University Press. 1990. DOI: https://doi.org/10.1017/CBO9780511808678.

[3] Lawrence Lessig. Code: And Other Laws of Cyberspace. New York: Basic Books. 1999, 89-112. ISBN: 978-0465039132

[4] Robert K Merton. Social Theory and Social Structure. New York: Free Press. 1968, 120-124. ISBN: 978-0029211304

[5] Allison Christians. Form over Substance in Canadian Tax Treaty Policy. McGill LJ 47 at 53. 2017: 62: 2. https://mcgilllawjournal.ca/articles/form-over-substance-in-canadian-tax-treaty-policy/.

[6] Boaventura de Sousa Santos. Toward a New Legal Common Sense: Law, Science and Politics in the Paradigmatic Transition. New York: Routledge, USA. 2002, 298. https://www.routledge.com/Toward-a-New-Legal-Common-Sense-Law-Globalization-and-Emancipation/Santos/p/book/9780406949974.

[7] Ethereum Foundation. 'EIP-1400: Security Token Standard'. 2018. https://github.com/ethereum/EIPs/blob/master/EIPS/eip-1400.md.

[8] Cass R Sunstein. Algorithmic Transparency in the Administrative State. 71 Duke LJ 1. 2022. https://scholarship.law.duke.edu/dlj/vol71/iss1/1/.