“Recent insolvencies involving several crypto asset trading platforms highlight the tremendous risks associated with trading crypto assets, particularly when conducted on unregistered platforms based outside of Canada.”
The Canadian Securities Administrators (CSA), the council of the securities regulators of Canada’s provinces and territories, published a notice describing enhanced investor protection commitments it expects from crypto asset trading platforms (CTPs) operating in Canada.
Unregistered crypto trading platforms that continue to operate in Canada while pursuing registration are expected to provide an enhanced pre-registration undertaking to their principal regulator within 30 days of publication of this notice.
“Tremendous risks associated with trading crypto assets”
Stan Magidson, CSA Chair and Chair and CEO of the Alberta Securities Commission, said: “Recent insolvencies involving several crypto asset trading platforms highlight the tremendous risks associated with trading crypto assets, particularly when conducted on unregistered platforms based outside of Canada.”
Pre-registration undertakings include enhanced expectations regarding the custody and segregation of crypto assets held on behalf of Canadian clients and a prohibition on offering margin, credit, or other forms of leverage to any Canadian client.
Crypto trading platforms will also be restricted from allowing clients to purchase or deposit stablecoins and proprietary tokens without the prior written consent of the CSA.
If a CTP is unable or unwilling to provide an enhanced pre-registration undertaking, the CSA expects it will take appropriate action to off-board existing Canadian users and impose restrictions to prevent Canadian users from accessing its products or services.
The Canada regulator further warned residents that crypto asset trading is highly risky and may not be suitable for many investors, particularly retail investors, due to the high volatile nature of the value and liquidity of crypto assets.
If investors still choose to go forward with investing in crypto assets, the CSA recommends they consult the list of platforms that are registered with the CSA and learn the fundamentals of crypto assets before investing.
The CSA co-ordinates and harmonizes regulation for the Canadian capital markets but warned that regulatory oversight cannot eliminate all risks associated with trading in crypto assets.