Mogo filing says relationship with Coinsquare is delaying CSA exemption

Three physical Bitcoins
Exemptive relief and registration a no-go for Mogo (for now).

Mogo is still waiting on Canadian securities regulators for exemptive relief and registration as a restricted dealer of cryptocurrency assets after not obtaining either by December 31.

According to a recent regulatory filing, Vancouver-based FinTech company Mogo first began discussions with the Canadian Securities Administrators (CSA) in 2021, submitting a pre-filing application to the British Columbia Securities Commission (BCSC) in late August.

This was followed by a formal registration application and an exemptive relief application Mogo sent to the BCSC, Ontario Securities Commission (OSC), and other Canadian securities regulators on November 29, with the hope of securing both by the end of last year, or another mutually agreed upon date.

According to Mogo, given its business model, trade flow process, and relationship with Coinsquare, its regulatory approval process remains ongoing.

However, Mogo stated in a December 31 regulatory filing addressed to the OSC and BCSC that because of the company’s business model, trade flow process, and relationship with its exchange partner (Coinsquare), Mogo’s pursuit of registration and exemptive relief remains ongoing.

Toronto-based crypto trading startup Coinsquare serves as the exchange partner for MogoCrypto, Mogo’s crypto trading platform. Mogo acquired a 39 percent stake in Coinsquare last year.

“Regulation of crypto assets remains an evolving process in Canada,” Christy Cameron, Mogo’s VP of investor relations, told BetaKit. “Mogo, along with other market participants, continue to work closely with Canadian securities regulators to tailor their existing rules to address the unique requirements presented by different trading and/or business models. Determining the appropriate regulatory framework requires careful consideration to ensure that the needs of the business, its users and the regulators are addressed.”

Cameron added that Mogo continues to work with the Canadian Securities Administrators (CSA) to develop a suitable framework. She did not clarify what specific aspects of its business model, trade flow approach, or relationship with Coinsquare delayed this regulatory process.

The BCSC declined to comment on the filing, citing its need to keep pending applications and discussions with particular entities confidential.

The OSC pointed BetaKit towards the following paragraph from the filing: “Given [Mogo’s] business model, and the need to tailor the terms and conditions of the registration and exemptive relief to the specificities of [Mogo’s] business model, trade flow process and relationship with [Coinsquare], the registration and exemptive relief process is still ongoing and will not be completed by December 31, 2021.”

RELATED: Mogo increases Coinsquare ownership stake for second time, gains ability to buy majority

The CSA has made clear that platforms which allow Canadian users to trade crypto assets that are securities or derivatives are subject to securities legislation. As such, regulators are requiring such firms to register as investment dealers.

As transitions towards a final regulatory framework, Mogo has applied to be registered as a restricted dealer and gain exemption from certain requirements associated with this legislation. With the move, the firm has joined a growing list of other companies in the crypto space that have sought to gain regulatory approval.

Founded in 2003, Mogo is a Toronto Stock Exchange-listed digital payments and FinTech app that allows users to buy and sell stocks and Bitcoin, secure credit score monitoring and ID fraud protection, and access personal loans.

Through its automated MogoCrypto platform, Mogo allows its clients to access Coinsquare’s platform to transact crypto contracts in all provinces and territories of Canada, aside from Québec.

RELATED: Following Moka acquisition, Mogo launches stock trading app

In light of Mogo’s still-pending applications, the company stated in the filing that, until its gains registration and exemptive relief, it plans to limit client trading through MogoCrypto to crypto contracts based on Bitcoin only. Mogo told BetaKit this move does not impact its users, as the company has never offered any other cryptocurrencies aside from Bitcoin.

Until it obtains registration, Mogo also promised to continue to deal only with Coinsquare, but noted it may work with another exchange partner as may be approved by the OSC. In the meantime, the company also said it will continue to hold all client assets related to crypto contracts, including cash, in an account with Coinsquare.

The filing follows Mogo’s recent launch of its new commission-free stock trading platform, MogoTrade, after the company secured the green light from the Investment Industry Regulatory Organization of Canada (IIROC).

In its quest to gain restricted dealer status, Mogo follows in the footsteps of fellow Canadian FinTech firms like CoinSmart, Wealthsimple, Coinberry, Bitbuy, and Netcoins.

Feature image by Dmitry Demidko via Unsplash

Josh Scott

Josh Scott

Josh Scott is a BetaKit staff writer who loves to tell Canadian business and tech stories. His coverage is more complete than his moustache.

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