The CSA, Canada’s umbrella markets regulator, published a notice today outlining a number of changes to the country’s approach to regulating crypto exchanges. These include a crackdown on stablecoins, prohibition of leverage, and increased expectations regarding crypto asset custody and segregation.
“Recent insolvencies … highlight the tremendous risks associated with trading crypto assets.”
These moves, first indicated by a February 16 report from CoinDesk, come in light of the recent collapse of a number of different unregulated international crypto trading platforms, from Voyager Digital to Celsius Network and FTX, amid the broader crypto downturn.
“Recent insolvencies involving several crypto asset trading platforms highlight the tremendous risks associated with trading crypto assets, particularly when conducted on unregistered platforms based outside of Canada,” CSA chair Stan Magidson, also chair and CEO of the Alberta Securities Commission, said in a statement provided as part of the notice.
Though this notice is focused primarily on unregistered crypto exchanges, some of this guidance may also be relevant to registered platforms. The CSA noted that principal regulators will be contacting regulated platforms to discuss whether any changes to their registration or related relief may be required.
These commitments will apply to the pre-registration undertakings the CSA rolled out in August 2022 for unregistered crypto trading platforms operating in the country while they pursue full registration.
These pre-registration undertakings will now entail “enhanced expectations regarding the custody and segregation of crypto assets held on behalf of Canadian clients.”
The CSA is also prohibiting Canadian crypto trading platforms from offering “margin, credit, or any other forms of leverage” to any Canadian client, and banning exchanges from permitting clients to buy or deposit stablecoins or proprietary tokens “without the prior written consent of the CSA.”
Unregistered crypto trading platforms operating in Canada while pursuing registration are expected to provide an enhanced pre-registration undertaking to their principal regulator within the next 30 days.
So far, two crypto trading platforms have completed pre-registration undertakings in order to continue operating in Canada: Singapore’s Crypto.com and Toronto-based Coinsquare, which has since secured full registration with the Investment Industry Regulatory Organization of Canada.
To date, 10 other platforms—Wealthsimple, Bitbuy, Bitvo, Coinberry, Fidelity, Netcoins, Newton, CoinSmart, Bitvo, and VirgoCX—have received temporary exemptive relief to offer crypto products to investors in Canada. The CSA told BetaKit earlier this month that more than 20 others are currently seeking registration.
Feature image courtesy Pexels. Photo by Alesia Kozik.