CSA Outlines Crypto Exchange Regulations in Canada

The Canadian Securities Regulator published a new notice in their ongoing development of crypto regulation framework. According to the new guidance, the majority of Crypto Exchange Regulations in Canada will have to abide to the Securities Law. Will Canada set the example for other countries? 

17 January, 2020 | AtoZ Markets – The Canadian Securities Administrators (CSA) have published new guidelines indicating that most digital asset exchanges operating in the country will be subject to securities law. Moreover, the latest guidelines released on Thursday explicitly specify that any crypto exchanges facilitating securities or asset trading will be subject to securities legislation.

Most Crypto Exchanges Likely Fall under Securities Regulations in Canada

The securities law can be applied to platforms that facilitate the buying and selling of crypto assets. “The user’s contractual right to the crypto asset may itself constitute a derivative”. The guidelines also indicate that most centralized crypto exchanges will have to follow the securities law. Non-custodial exchanges only could be excluded from the list as they do not manage client funds. Louis Morisset, CSA President, added:

“The evolving landscape of the sector pushes us to clarify our regulatory framework to better support fin-tech companies in Canada. We continue to consider the comments and responses to the consultation, which we launched last year. The staff notice has published today will help platform operators determine if their businesses are subject to securities legislation.”

This new guidance from the CSA has raised the alarm bells in the crypto sector. Since many digital currencies that the crypto exchanges offer investors, have potential voting or dividend rights to their holders. Therefore, digital currencies resembles quite a lot like securities. Adam Goldman, founder and president of Canada-based cryptocurrency exchange Bitbuy, said:

“CSA encourage the company, adding clarity to its proposed framework in March 2019.” Having a defined regulatory landscape will promote the cryptocurrency industry in Canada. However, it will provide platforms that seek to participate in the financial system a clear path forward”.

Read More: New Bill Seeks to Exempt Personal Crypto Transactions Taxes in the US

Many Countries Are Gearing up to Regulate the Digital Asset Industry

Cornell Law professor Robert Hockett told that when a digital asset don’t immediately deliver but store on the exchange, there is a risk that the asset will lose its value, resulting in a loss for the customers. The agency also advised the exchanges to seek legal advice and clarified its intentions to take action against those platforms.

However, many countries are now eager to regulate the digital asset sector under existing laws or introducing new ones.  Recently, Thailand plans to open up more to the digital asset industry by modifying existing cryptocurrency laws. Moreover, from 10 January 2020, new crypto regulation, Fifth Anti-Money Laundering Directive (5AMLD) has come to Europe, requiring KYC, and monitoring all transactions.

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