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Securities regulators publish guidance for cryptocurrency asset trading platforms

·3 min read

TORONTO — Canadian securities organizations have unveiled guidance around how trading platforms for cryptocurrencies should be regulated as digital token and crypto assets keep growing in popularity.

In a 56-page document released on Monday from the Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada, the regulators say platforms involved in the trading of digital tokens or crypto assets must become IIROC members or apply for interim registration as they transition to a long-term regulatory framework.

The guidance is intended to demonstrate how existing rules may be tailored to encompass crypto asset trading platforms rather than introduce new rules specifically geared toward them.

The goal, the agencies said, is to balance the flexibility needed to foster innovation in Canada's capital markets with protecting investors and providing fairness and efficiency.

"The guidance in our notice details steps platform operators need to take to comply with securities legislation as they prepare to fully integrate into the Canadian regulatory structure," said Louis Morisset, CSA chair and president and CEO of Quebec securities regulator Autorite des marches financiers, in a release.

Their guidance was triggered by the substantial growth of crypto asset platforms in recent years and follows a consultation paper published in 2019 that outlined a proposed regulatory framework and asked for comments.

The CSA and IIROC said they received 52 comment letters in response to the paper and consulted with industry stakeholders.

Regulation has been a hot topic among them for years, but gained increasing attention in 2017, when Wealthsimple announced it was offering the first government-regulated way to buy and sell cryptocurrency in Canada.

Morisset recommended cryptocurrency platforms looking to similarly bring their operations into compliance now that the guidance is finalized should contact their local securities regulator to discuss the registration process.

"We remind all CTPs that are dealing with Canadians, including foreign-based CTPs, that they are expected to comply with Canadian securities legislation,” added Louis Morisset. “Failure to do so could result in CSA members pursuing enforcement action.”

The Ontario Securities Commission said in a release that it is notifying crypto asset trading platforms currently offering trading in derivatives or securities to persons or companies located in Ontario that they must bring their operations into compliance soon or face regulatory action.

The OSC is asking platforms to contact its staff by April 19 and said if that deadline is not met, it will take enforcement action.

The regulator is treating platforms located outside of Ontario that allow people in the province access as operating in Ontario for the purposes of securities regulation. "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.”

This report by The Canadian Press was first published March 29, 2021.

The Canadian Press