Canada Issues New Crypto Guidance

Marco Green
January 19, 2020

Most recently, the country's regulators, the Canadian Securities Administrators (CSA) issued guidance regarding crypto trades.

The agency has advised the exchanges to seek legal counsel and clarified its intentions to take action against any such platforms - based in Canada or overseas - offering services to Canadian clients.

However, the problems still do not end there, and the situation is further complicated by crypto exchanges, and especially by the way that some of them operate. In other words, the exchanges that do not list securities, as well as those that do not hold and manage users' funds, both fall outside of the securities laws. "The user would be subject to ongoing exposure to insolvency risk (credit risk), fraud risk, performance risk and proficiency risk on the part of Platform". More specifically, the note makes a difference between those exchanges which take custody of their clients' assets and those which don't.

The Canadian Securities Administration wrote in its notice, "In our view, a mere book entry does not constitute delivery, because of the ongoing reliance and dependence of the user on the Platform in order to eventually receive the crypto asset when requested". Thus, these exchanges are offering "the right to something in the future", and therefore must follow the security guidelines.

The latest guidelines stipulate that the securities law applies to all crypto exchanges and bitcoin-linked businesses facilitating the trading of securities or assets, as well as those handling the buying and selling of cryptos such as bitcoin, which falls under the commodities category.

The regulators' goal was to clarify when crypto trades may fall outside of the country's current securities laws, as the laws are not covering all instances in which cryptocurrencies can be used. The most prominent being the recent shut down of QuadrigaCX which was triggered due to the death of its owner. Per the document, which is also guidance, these exchanges will be subjected to traditional derivatives and security regulations. Back in December 2019, it has been said by the NASAA that crypto investments are in the top 5 threats for investors in 2020.

Other reports by Click Lancashire

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