Montréal-based FinTech Shakepay has been made a member of the Canadian Investment Regulatory Organization (CIRO), clearing a regulatory hurdle that will hold the company’s cryptocurrency trading platform to a higher standard.
“Regulation matters. It’s the foundation for establishing confidence in this space.”
Shakepay is now the first crypto platform in Québec to be certified as an investment dealer with CIRO. With this new designation, Shakepay customers will benefit from up to $1 million CAD in insurance coverage for their cash through the Canadian Investor Protection Fund (CIPF). However, that coverage does not extend to crypto assets.
“Regulation matters,” Eric Richmond, Shakepay’s head of business development and general counsel, wrote in an email to BetaKit. “It’s the foundation for establishing confidence in this space.”
Customers using the crypto platform will also now be afforded CIRO protections, including compliance oversight and capital adequacy, Richmond said.
In preparation for the CIRO membership, Shakepay divided its operations into two entities: Shakepay Inc., the CIRO-certified crypto exchange, and Shakepay Financial, which handles cash operations and everyday payment services such as direct deposit, bill pay, and a Bitcoin cashback Visa card. Shakepay claimed that Shakepay Financial will be registered as a payment service provider under the federal Retail Payments Activity Act later this year.
Shakepay differs from other crypto marketplaces in a few key ways. It buys and sells Bitcoin from its customers, and instead of charging commission or transaction fees, it charges a built-in “spread,” or markup, typically between 0.5 and 2 percent on Bitcoin at the time of the transaction.
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The company is already certified by Canada’s anti-money laundering agency, the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC), as a money service business (MSB). Shakepay is also registered as a restricted dealer with the Autorité des marchés financiers (AMF) in Québec and the securities regulatory authorities in all provinces and territories.
As a CIRO member, Shakepay must now make disclosures regarding “account agreements, price and trade execution, asset handling, eligibility criteria, customer rights, and potential risks,” Richmond said.
The application process was extensive and rigorous, Richmond added, requiring Shakepay to demonstrate adherence to anti-money laundering protocols, as well as prove financial adequacy and customer protection measures.
CIRO’s Deal Member Rules state that dealer members “must have and maintain at all times risk-adjusted capital in an amount not less than zero.” Shakepay confirmed that CIRO requires it to maintain a certain level of working capital, but declined to say how much, noting that it’s different for every member.
“There are key financial metrics that CIRO ensures we meet on a monthly basis to ensure that the company is financially viable,” Richmond added.
Shakepay joins the ranks of other Canadian FinTech firms and crypto platforms cleared as investment dealers with CIRO, such as Wealthsimple and WonderFi through its investment dealer platform Coinsquare. Last year, international exchange Coinbase secured a restricted dealer licence in Canada.
In a statement, CEO Jean Amouiny said Shakepay’s membership is a “major step forward in providing our customers with the trust and peace of mind they deserve.”
Shakepay has sought to position Bitcoin trading as a viable long-term investment option for Canadians who feel financially squeezed. The platform allows customers to trade in Bitcoin and Ethereum, but no other cryptocurrencies.
Last summer, Shakepay appealed to the Department of Finance to classify Bitcoin as a qualified investment during a federal consultation about whether the government should allow Canadians to deposit cryptocurrency directly into tax-advantaged savings plans such as RRSPs or TFSAs.
Co-founded in 2015 by Amiouny and CTO Roy Breidi, Shakepay began as a Bitcoin-loadable credit card that users could spend in physical retail stores. In 2018, Shakepay pivoted into a crypto exchange and says it has grown to over 1.4 million Canadian users.
In early 2022, the company secured a $44-million Series A and $313 million valuation, following a surge in growth in 2021. Later that year, Shakepay and Wealthsimple were both hit with class-action lawsuits seeking $10 million in punitive damages for misleading crypto trading fees. The “crypto winter” that followed saw drastic volatility in the prices of Bitcoin and Ethereum, informed by massive fraud scandals like the collapse of FTX.
Trading platforms operating in Canada have not been immune from scandal, either, highlighting the potential role that regulatory compliance may play in the future: BC-based ezBtc was fined $18.4 million for stealing from customers, and Binance was fined $6 million by FINTRAC before leaving Canada altogether in 2023. Binance had never obtained the necessary regulatory approval to operate in Canada.
Feature image courtesy Shakepay.