Canadian Securities Regulators: Crypto Trading Platform Enforcement Coming

CSA | Release | Dec 12, 2022

CSA crypto enforcement - Canadian Securities Regulators:  Crypto Trading Platform Enforcement ComingFollowing recent events in the crypto market, the Canadian Securities Administrators (CSA) is strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada.

  • On August 15, 2022, the CSA announced that it expected commitments from unregistered crypto trading platforms operating in Canada while they pursue registration. These commitments were to be made to their principal regulator in the form of a pre-registration undertaking (PRU), which included terms and conditions consistent with requirements currently applicable to registered platforms.
    • The CSA is of the view that stablecoins, or stablecoin arrangements, may constitute securities and/or derivatives.
  • Enforcement coming: If a platform currently subject to securities legislation in Canada does not deliver a PRU to its principal regulator or cease operating, the CSA will consider all applicable regulatory options to bring the platform into compliance with securities law, including enforcement action.
    • Timing:  CSA members will shortly communicate to platforms a deadline by which PRUs must be delivered. Platforms located outside of Canada that are accessible by Canadians are regarded as operating in Canada for the purposes of securities regulation.

See: 

Canadian Crypto Industry is Working Towards Legitimacy

Canadian Securities Regulators Expect Crypto Trading Platforms to Complete Pre-Registration Step

CSA 2021-2022 Enforcement Report highlights: Regulators’ Actions to Hold Securities Law Violators Accountable

  • Compliance: Crypto trading platforms giving these undertakings agree to comply with expanded terms and conditions that will include, among other things, requirements to hold Canadian clients’ assets with an appropriate custodian and segregate these assets from the platform’s proprietary business, as well as a prohibition on offering margin or leverage for any Canadian client.
    • Custodians will generally be considered qualified if they are regulated by a financial regulator in Canada, the U.S., or a similar jurisdiction with a supervisory regime for conduct and financial regulation.
  • Crypto assets or related financial products are high-risk investments. These risks could result from, among other things, crypto trading platform non-compliance with registration terms and conditions or undertakings, interconnectedness within the crypto sector, insolvency, hacks, price volatility and uncertain value propositions for individual assets.
  • Current regulation and enforcement:

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