I would bet it's politically motivated, YC strikes me as money at all costs, and very dismissive of the techno feudalism they help support

I can't speak for YC, but legal overhead is an operational pain.

It's safe to assume YC will continue to fund Canadian founders, but they'll now require them to incorporate in Delaware, Singapore, or the Cayman Islands - none of which is significantly difficult for a founder. You could literally make a US Corp via Firstbase in a couple of minutes [0]

[0] - https://www.firstbase.io/partnership/y-combinator

Shopify is basically the only really successful Canadian start-up.

It's very hard to run a very small business here.