Canada tightens rules for crypto exchanges, margin trading
Canada’s financial regulator will reportedly roll out a co-ordinated oversight regime for cryptocurrency activities later this month.
Two people, who have been briefed on the plans, told CoinDesk that all crypto trading platforms seeking registration will be obliged to sign undertakings to comply with investor protections.
The new rules will also make it more difficult for retail investors to trade cryptocurrencies using leveraged bets in the aftermath of the FTX collapse.
The Canadian Securities Administrators (CSA) plans to strengthen its oversight of cryptocurrency exchanges operating in the country. As part of a basket of new registration requirements, crypto applicants will have to agree to tighter rules, including a ban on margin and leverage trading.
Additionally, the proposal prevents crypto providers from accepting payments via credit cards and requires them to keep customer assets segregated from their own operational funds.
These measures also include suggestions that providers should be forced to hold all Canadian clients’ assets “with an appropriate custodian and segregate these assets from the platform’s proprietary business.”
To continue operating while their application is being processed, cryptocurrency platforms must give their primary regulator a pre-registration undertaking. By making these commitments, the crypto exchange acknowledges that its platform is bound by terms and conditions that address investor protection issues.
If a cryptocurrency trading platform is unable to file an undertaking or does not adhere to its requirements, CSA members may seek legal action.
The CSA went on to warn that it reached out to crypto-asset trading platforms to initiate the registration process, or face enforcement action, including temporary orders.
The new registration rules come amid a nation-wide crackdown on unregulated exchanges. Binance, the world’s largest cryptocurrency exchange, informed a Canadian provincial regulator last year that it would no longer be accepting new customers. The industry’s giant seemingly opted to pull out of Canada, rather than comply with securities law or face regulatory scrutiny.
The move follows the Ontario Securities Commission’s onslaught on Binance back in 2021 for their alleged failure to comply with securities law. At the time, OSC said Binance has broken its word to regulators after it had previously told its staff that no new transactions involving Ontario residents would occur.