The Ontario Securities Commission plans to start cracking down on unregistered cryptocurrency-trading platforms, giving businesses three weeks to comply with its guidelines before it starts taking action.
Monday’s announcement comes one week after The Logic reported there are now more than 600 companies that offer cryptocurrency-trading services in Canada that have not registered with securities regulators, and at least 11 that haven’t registered with the Financial Transactions and Reports Analysis Centre of Canada. There’s also no evidence any of them have faced penalties from Canadian authorities.
One week after The Logic reported there are now more than 600 companies that offer cryptocurrency-trading services in Canada that have not registered with securities regulators, the Ontario Securities Commission has announced plans to start cracking down on the problem. The regulator is giving businesses three weeks to comply with its guidelines before it starts taking action. Additionally, the Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada published a notice providing more details on the steps they believe platforms need to take to comply with securities regulations, outlining a process where some platforms may be allowed to operate as restricted dealers while they seek full registration.
“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 chief executive of the OSC, in a release. “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.”
The Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada also published a notice Monday providing more details on the steps they believe platforms need to take to comply with securities regulations. The notice explains the steps for submitting applications to provincial securities regulators and the IIROC, and outlines a process where some platforms may be allowed to operate as restricted dealers while they seek full registration.
The CSA’s announcement also came with a warning for businesses that don’t comply.
“We remind all [cryptocurrency-trading platforms] that are dealing with Canadians, including foreign-based [platforms], that they are expected to comply with Canadian securities legislation,” said CSA chair Louis Morisset in the release. “Failure to do so could result in CSA members pursuing enforcement action.”
With investor interest in cryptocurrencies growing thanks to their boom in price and increasing integration with the mainstream financial system, the business of enabling Canadians to exchange their dollars for bitcoins has been booming as well.
FINTRAC and the CSA both asserted jurisdiction over the industry in 2020. The CSA released guidance that January stating that while popular cryptocurrencies like Bitcoin and Ether are not themselves securities, the contracts many trading platforms enter into with customers are—meaning exchanges that enter into such contracts must register as securities dealers. However, Toronto-based online wealth-management company Wealthsimple is the only such business that has completed its registration to date.
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The OSC said it has concerns about cryptocurrency-trading platforms that are planning to go public despite the fact they haven’t registered as securities dealers. “There are potential public interest concerns with a platform that is required to be registered, but that is not, becoming a reporting issuer,” the regulator said in the release.
Since The Logic published its story last Monday on the explosion of cryptocurrency-trading businesses in Canada, 12 new businesses have registered with FINTRAC as dealing in virtual currencies, bringing the total to 646.
This story will be updated.