The FTX collapse has further drawn the attention of regulators around the world to the digital asset market. Last Monday (12), for example, the Canadian Securities Administrators (CSA), which regulates the securities market in Canada, published a note, with an update for the cryptocurrency trading platforms that operate in the country. Among other things, the CSA has banned leverage and margin trading with crypto by companies operating in Canada.
Canada strengthens oversight of crypto companies
The CSA made it clear that it took the action in light of “recent events in the cryptocurrency market”. According to the regulator, the action seeks to strengthen supervision of cryptocurrency trading platforms. At the same time, it is a way to expand existing requirements for platforms operating in Canada. It is worth noting that on August 15 of this year, the CSA had already announced that it expected commitments from unregistered digital asset platforms to operate in the country while seeking registration. These commitments, according to the CSA, should be in the form of a pre-registration commitment (PRU). The regulator also pointed out that platforms located outside of Canada, but which are accessible by Canadians, are also considered to be operating in Canada for regulatory purposes. Companies that sign this commitment must comply with certain determinations of the CSA. Among them, they will not be able to offer margin or leveraged trades: “Crypto platforms offering these engagements agree to abide by the expanded terms and conditions. They will include, among other things, requirements to hold Canadian client assets with an appropriate custodian and to segregate those assets from the platform’s proprietary businesses, as well as a prohibition on offering margin or leverage to any Canadian client.” The CSA further said it will publish more details on this updated approach in the future.
Stablecoins may constitute securities
Another segment of the crypto market that the CSA is eyeing is stablecoins. According to the note, the regulator continues to monitor and evaluate the presence and role of stablecoins in Canadian capital markets. As a result of this study, the CSA believes that stablecoins may constitute securities and/or derivatives. This implies that companies registered or signing the PRU will not be able to allow customers to trade or expose themselves to stablecoins. “Crypto trading platforms that are registered or have entered into a pre-registration commitment are reminded that they are prohibited from allowing Canadian clients to trade or gain exposure to any crypto asset that is a security and/or a derivative.” The CSA said it expects digital asset platforms to have policies and procedures in place to determine whether each crypto asset they provide exposure to is a security and/or derivative. Finally, the regulator pointed out that, even with the adoption of these measures, cryptoassets or financial products related to cryptoassets are high-risk investments. These risks can include insolvency, hacks, price volatility, uncertain value propositions, among others. “Canadian investors are urged to exercise caution and consider seeking advice from a registered investment adviser before investing in crypto; if they choose to undertake such an investment, despite all the known risks, they must use a platform registered with the members of the CSA.”
