The Ontario Securities Commission (OSC) is looking to crack down on unregistered cryptocurrency trading platforms operating in the province.
On Monday, the Canadian Securities Administrators (CSA) issued new guidance for platforms currently facilitating trading in security tokens or instruments or contracts involving crypto assets. Part of that framework was the requirement for such firms to register as an investment dealer and become a member of the Investment Industry Regulatory Organization of Canada (IIROC).
“Unregistered crypto-asset trading platforms expose Ontario investors to significant risks, including potential loss, theft and misuse of their assets.”
– Grant Vingoe, OSC
According to a separate announcement issued by the OSC on Monday, platform operators have three weeks to contact the OSC and discuss how they plan to bring their operations into compliance. Those that do not will face “potential regulatory action,” according to the statement.
“Unregistered crypto-asset trading platforms expose Ontario investors to significant risks, including potential loss, theft and misuse of their assets. The recent explosion of unregistered platforms has magnified these risks,” said Grant Vingoe, chair and CEO at the OSC.
“Regulatory oversight serves a critical role in investor protection, and we expect platforms to act swiftly to bring themselves into compliance with Ontario securities law,” added Vingoe.
The OSC said it has seen a “large increase” in the number of platforms currently offering crypto-assets and contracts to people and businesses in Ontario. There are more than 600 companies offering crypto trading services in Canada that have yet to register with securities regulators, according to a recent report from The Logic.
Regulators across Canada have been working over the last few years to determine how exactly to regulate cryptocurrencies, and in the process have come down on trading platforms, including several notable Canadian tech companies operating in this space.
Earlier this month, the CSA, in tandem with provincial and territorial securities regulators, published guidance meant to improve the quality of disclosures around crypto-assets.
The OSC has also conducted its own research to determine Canadians’ awareness of crypto trading.
A 2018 study by the Ontario Securities Commission has found that while five percent of Ontarians (approximately 500,000 people) owned cryptocurrencies such as Bitcoin and Ether at the time, many of those Ontarians don’t understand enough about them.
In 2018, the OSC also called out specific firms that it said were not registered to provide advice on investing in securities in Ontario, including BTCReal, BitSerial, Hypercube Ventures LP.
The OSC’s 2019 investigation into now-defunct QuadrigaCX determined the CEO of that crypto trading platform was operating a Ponzi scheme. Its 10-month investigation was completed in collaboration with securities commissions in British Columbia, Quebec, Nova Scotia, New Brunswick, as well as the United Kingdom, United States, Switzerland, Singapore, and the British Virgin Islands.
Last year, the OSC alleged Toronto crypto trading platform Coinsquare engaged in market manipulation and misled its clients. Since that time, Coinsquare overhauled its leadership and streamlined its business plan and technology, launching its crypto platform Quick Trade in February. This month, Coinsquare entered into an agreement with the Canada Revenue Agency to hand over information pertaining to its clients’ account history and trading data, in an unrelated case.
As part of its Monday announcement, the OSC said it was also aware of platforms that are seeking to participate in transactions such as initial public offerings, reverse takeovers, changes of business, and transactions involving Capital Pool Companies. The regulator said platforms must contact OSC staff if they intend to become reporting issuers through an initial public offering or other transaction.
Image source Unsplash. Photo by André François McKenzie.