Canadian Regulators Crackdown on Unregistered Crypto Trading Platform


April 16, 2021 | AtoZ Markets – In March 2021, Canadian Securities Administrators (CSA) made it official that as of April 19, 2021, Canadian cryptocurrency exchanges must register with the Investment Industry Regulatory Organization of Canada (IIROC). The alternative measure is to apply for interim status until individual platforms have clarified what regulations will apply to them.

The latest Canadian regulations for crypto exchange in Canada apply to any and all platforms that facilitate digital token trades and offer other forms of cryptocurrency-related services. The guidelines for crypto exchanges from the CSA are based on the current guidelines for traditional securities.

Cryptocurrencies are not acknowledged as securities in Canada. However,in the future, they will be treated by the IIROC in a very similar way. As such, regulations for traditional securities are just a guideline. The specific regulations will depend on the individual platform and the functions and services that they offer.

These new regulations apply to all for-profit crypto exchanges that operate in Canada, as well as those that facilitate international trades. Therefore, both Canadian exchanges, such as Bitbuy and CoinSmart, as well as international exchanges such as Binance, will need to comply with the new Canadian-based regulations.

Decentralized crypto exchanges, such as Bisq, do not operate as a company.As such, at least for now, they will be left out of the new regulations. However, it is speculated that it will become increasingly difficult for Canadian users to use non-registered crypto exchanges.

This means that all trading platforms that profit from digital currencies must apply with the IIROC to determine what regulations apply.

Louis Morisset, the CSA chair and chief executive officer of the Autorité des marchés financiers, states that currently,multiple crypto trading platforms have initiated the process of registration with the CSA’s sandbox program.

Morisset states that all domestic and foreign platforms must ensure they are in compliance with Canada’s securities legislation. As such, companies that profit from trading cryptocurrencies will need to contact their local securities regulator to discuss which registration processes apply to their platform.

However, even if the crypto business does not meet the new requirements for securities traders, the CSA is still encouraging all companies to come forward to receive the correct direction.

What Does This Mean?

Importantly, cryptocurrencies such as Bitcoin and Ethereum are not currently treated as securities. However, the contracts that they are used for and the crypto exchanges that profit off them are now subject to similar laws as securities dealers.

The majority of crypto-based businesses are only required to register with the Financial Transactions and Report Analysis Centre of Canada (FINTRAC). FINTRAC is a government-run agency, which tracks and polices money laundering and terrorist financing.

It is important to note that the vast majority of cryptocurrency is used for completely legal transactions. Although cryptocurrencies are pseudonymous, with forensic analysis, they are traceable. It is for this reason that the FBI holds one of the largest Bitcoin wallets of seized funds from the Silk Road and Dark Web. As such, it is highly inadvisable to use cryptocurrency for nefarious purposes, as it leaves a digital trail.

One perspective is that CSA is attempting to strike a balance and flexibly applying regulations for each unique crypto platform. From this perspective, this makes new regulations a move to offer new guidance for cryptocurrency traders and companies that run with them.

The other side of this is that there will be fewer excuses for skirting the line or pleading ignorance. Up until now, the regulations have been highly interpretable; going forward, that will no longer be the case.As of April 19, 2021, crypto exchanges with operations in Canada will need to register with the IIROC to learn what regulations apply to their platform and trading services.

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