Canadian securities regulators are taking steps to crack down on unregulated cryptocurrency trading platforms, following the lead of other jurisdictions such as the U.S. and China.
Both the Ontario Securities Commission and the Canadian Securities Administrator have issued new rules pertaining to cryptocurrency trading.
Under the new guidelines, cryptocurrency trading platforms have 30 days to demonstrate to regulators that the are following specific rules if they want to maintain operations in Canada.
Those rules include making sure client cryptocurrency holdings are separate from the firm’s own funds and a ban on offering margin trading or other forms of debt investing.
Firms are also no longer allowed to offer stablecoins in Canada. Stablecoins are a form of cryptocurrency that is tied to the value of another asset such as the U.S. dollar or price of gold.
Should a cryptocurrency trading platform fail to provide an official “pre-registration undertaking” within 30 days, they will be expected to wind up their Canadian accounts and block clients from accessing their services.
The new rules target cryptocurrency trading platforms that haven’t yet registered with securities regulators in Canada.
There are currently 11 crypto trading platforms that have registered with securities regulators in Canada, according to the Canadian Securities Administrator. Another 20 crypto platforms still need to register.
The new regulations in Canada are similar to those being enacted by the U.S. Securities and Exchange Commission (SEC) in America and follow the $8 billion U.S. collapse last fall of crypto exchange FTX, a bankruptcy that led to contagion across the global crypto sector.
The new rules are a reversal for Canadian securities regulators that, until now, had encouraged cryptocurrency trading.
Canada, for example, was the first country to legalize cryptocurrency exchange traded funds (ETFs). Crypto ETFs are currently not permitted in the U.S. and many other jurisdictions due to the perceived risk to investors.
