Canadian Security Administrators issues guidance on securities legislation for crypto exchanges
Mon, 20 Jan 2020, 12:32 pm UTC
The Canadian Securities Administrators (CSA) issued a notice on Thursday to guide crypto exchanges on the application of securities regulation.
Based on the guidance, the securities legislation would apply to platforms that facilitate transactions related to crypto-assets that are derivatives or securities or such contracts or instruments that are crypto derivatives.
“Securities legislation may also apply to Platforms that facilitate the buying and selling of crypto assets, including crypto assets that are commodities, because the user’s contractual right to the crypto asset may itself constitute a derivative," the CSA added.
Furthermore, the regulator also noted that some platforms do not deliver the crypto asset to its users immediately. Instead, they merely provide the users with a "contractual right or claim" to an underlying crypto asset.
"In such cases, after considering all of the facts and circumstances, we have concluded that these Platforms are generally subject to securities legislation," it explained.
The regulatory guidance from the CSA comes after the country saw two major cryptocurrency exchange-related scandals. This includes the Quadriga incident in which access to over $190 million worth of funds was lost after the sudden demise of its founder Gerald Cotten. In a report, EY said that Cotten had misappropriated user funds to finance his own luxurious lifestyle.
The other involves the Einstein exchange, which was allegedly engaged in illicit activities. The exchange was shut down late last year and seized by the British Columbia Securities Commission (BCSC) after it received numerous complaints from users that they weren't able to access their funds. Accountancy firm Grant Thorton had found of the CA$16 million that the exchange owed to its clients, only CA$45,000 was left in "hard assets."
“It looks like [the CSA is] trying to capture every platform and I think they're trying to do that for consumer protection, to prevent another 'Quadriga or Einstein'," Pamela Draper, president and CEO of Bitvo told CoinDesk.
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