Following a recent settlement with the Ontario Securities Commission (OSC), Coinsquare is undergoing a major overhaul to its business and tech as the company faces new competitive pressures from Canadian FinTech unicorn Wealthsimple.
New Coinsquare CEO, Stacey Hoisak, told BetaKit the decisions reflected a “streamlined” business plan.
In addition to an overhauled leadership team, the changes include a re-launched trading platform leveraging new technology and protocols, an expansion beyond digital currency into institutional trading, and sale of peer-to-peer (P2P) cryptocurrency platform StellarX.
New Coinsquare CEO, Stacey Hoisak, told BetaKit the decisions reflected a “streamlined” business plan.
Hoisak became Coinsquare’s CEO after Cole Diamond stepped down as part of the company’s settlement with the OSC earlier this year. The OSC found Coinsquare had engaged in market manipulation through the reporting of inflated trading volumes or ‘wash trading,’ between July 2018 and December 2019.
In addition to penalties and leadership changes, Coinsquare was required to ensure that its platform aligns with securities laws. Upon meeting those conditions, Coinsquare could re-apply to the OSC and the Investment Industry Regulatory Organization of Canada (IIROC) for registration as an investment dealer and marketplace operator.
A company statement on those applications, made in November, indicate plans to provide institutional trading of cryptocurrencies in addition to the ‘retail’ trading of digital currencies that Coinsquare currently offers.
Institutional trading refers to the buying and selling of securities for accounts managed for a group or institution, typically pension funds, mutual fund families, insurance companies, and exchange traded funds (ETFs). Retailer traders are those that buy or sell securities for personal gain.
Hoisak called the decision to re-launch the platform and add institutional trading part of the company’s plan to “bring new innovative products into the Canadian market.” The CEO noted that the re-launch of Coinsquare’s trading platform has been in the works since late 2018.
The new platform will also include support for the Financial Information eXchange Protocol, an open standard used globally by large financial institutions to complete transactions, as well as “a robust set of APIs.”
With the revamp of Coinsqare’s platform also comes a move away from its P2P crypto marketplace StellarX, which the company acquired in early 2019. Coinsquare sold the marketplace in September to Ultra Stellar LLC (which operates as LOBSTR), a company based in Estonia focused on building solutions for the Stellar network. Terms of the deal were not disclosed.
Earlier this year, the Power Financial-owned Wealthsimple launched a cryptocurrency trading platform.
“[StellarX] no longer fit within our business plans, which we have streamlined,” Hoisak told BetaKit regarding the sale.
The decision to streamline its platform and add new trading capabilities comes as Coinsquare is facing increasing competitive pressures in the crypto trading market, notably from Canadian FinTech unicorn Wealthsimple.
Earlier this year, the Power Financial-owned Wealthsimple launched a cryptocurrency trading platform for Bitcoin and Ethereum.
Wealthsimple’s delve into the crypto space is backed by more than six years of experience operating marketplaces for consumer investing and trading of traditional securities. Wealthsimple also brings with it existing relationships with regulators. To launch Wealthsimple Crypto, the company received an exemption from the OSC and Canadian Securities Administrators (CSA) to operate and test its platform for a period of two years.
Wealthsimple’s crypto trading platform is also, notably, backed by Gemini Trust Company, a cryptocurrency exchange and custodian regulated by the New York State Department of Financial Services. Gemini was founded in 2014 by Cameron and Tyler Winklevoss.
Wealthsimple’s track record lies in stark contrast to Coinsquare’s own beleaguered relationship with regulators. The increased pressure from Wealthsimple entering the crypto space could also be a motivating factor in Coinsquare’s decision to embrace institutional trading, which Wealthsimple does not offer.
It’s not a two-horse race: multiple Canadian crypto trading companies are hoping to become the nation’s first fully regulated cryptocurrency marketplace.
RELATED: Canadian securities regulator publishes additional guidelines for trading crypto assets
As part of its application to the OSC and IIROC, Coinsquare claimed it had submitted an application to operate as “Canada’s first regulated marketplace for digital assets.” However, when Wealthsimple Crypto launched it was also touted as Canada’s first regulated crypto platform, as well as the only platform to be authorized by the CSA to operate in Canada. Notably, Welathsimple’s current regulatory approvals are limited to a two-year-pilot.
Coinsquare also faces increased pressure from other Canadian companies on the regulation front, including online cryptocurrency brokerage Netcoins. Earlier this year, the Vancouver startup applied for registration from the British Columbia Securities Commission (BCSC) and the CSA’s regulatory sandbox program, which Wealthsimple Crypto is a part of. Netcoins claimed that, if approved, it would operate the first regulated open-loop crypto asset trading platform in Canada.
Coinsquare has also overhauled its leadership team in addition to tech and business plans. In addition to Hoisak (previously Coinsquare’s general counsel, chief privacy officer and corporate secretary), Coinsquare brought on a new chief compliance officer, Lawrence Truong, and promoted Eric Richmond, Coinsquare’s vice president of legal, to COO.
The company also recently made some additions to its board of directors, including former president of the Toronto Stock Exchange Nicholas Thadaney, and Wendy Rudd, former senior vice president at IIROC.
The first phase of Coinsquare’s shift to its new platform is set for early 2021, with the second set for Q2 2021. Coinsquare will be working to migrate its existing users over to the new platform.