The Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) have published a Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Consultation Paper Proposed Framework for Crypto-Asset Trading Platforms.
The paper will seek input from the fintech community, market participants, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platforms (platforms) operating in Canada.
“This consultation outlines a proposed regulatory framework that provides clarity for platforms, greater market integrity and protection for investors,” commented Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers in a recent press release. “Platforms have told us that a tailored regulatory framework is welcome as they seek to build consumer confidence and expand their businesses across Canada and globally.”
“The emergence of digital and crypto assets continues to be a growing area of interest for regulators, investors and marketplaces – and, together, securities regulators are taking steps to deepen our understanding of this area,” stated Andrew J. Kriegler, President and CEO, IIROC. “We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”
Platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities and/or derivatives regulation. Depending on their structure, they may also introduce novel features that create risks to investors and Canada’s capital markets that may not be fully addressed by the existing regulatory framework. Where securities legislation applies to platforms, the CSA and IIROC are considering a tailored regulatory framework to address these novel features and risks.
The consultation paper seeks input on a number of areas that will assist in determining appropriate requirements for platforms. These include how to address custody and verification of assets, price determination, market surveillance, systems and business continuity planning, conflicts of interest, crypto-asset insurance, and clearing and settlement. The CSA and IIROC continue to engage with international regulators about their approach to platforms, and welcome input on a variety of regulatory approaches that exist in this area.
At present, there are more than 2000 crypto assets across Canada, and the interest in these assets continues to grow exponentially. With no regulatory oversight, users are opening themselves up to increased risk. The recent QuadrigaCX saga has no doubt accelerated the introduction of such safeguards and increased transparency as to who is responsible in unforeseen events.
“Coinberry welcomes an end to the ‘wild west’ of cryptocurrency in Canada with measured regulations that balance industry realities and consumer interests,” Andrei Poliakov, CEO of Coinberry, recently informed The Globe and the Mail.