Canada Proposes Regulatory Framework For National Crypto Exchanges
The regulatory authorities of Canada have recently decided to start the regulation of the crypto space in the country. Now, the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Securities Administrations (CSA) have united to start the regulation process.
These agencies have published a consultation paper recently, as they seek to understand the fintech industry of the country better in order to develop a regulatory framework which will be useful for the industry.
According to the CEO and president of IIROC, Andrew Kriegler, the regulatory agencies are very interested proving more clarity about this market, so the country can adapt to innovation and create a space for these unique business models. At the same time, the regulatory agency is able to keep protecting the investors in the country.
Another important point is that the regulators have affirmed that they want to apply the securities law as much as they can with cryptocurrencies because of their high risk. Despite the name, most “utility tokens” are basically securities and can be considered so. They may distribute dividends and derivatives, so they have to be considered this way.
The regulatory agencies have also defined crypto trading platforms as “hybrid in nature”, which means that they will be able to perform several functions at the same time like being exchanges, custodians, dealers, trading systems and even the clearing agencies at the same time. This requires a new set of regulation, obviously.
So, the goal of the agencies is to create a tailored set of laws which would address the risk of this industry at the same time that it would help the companies, as the country does not want to curb the growth of this sector.
At the moment, no exchange in Canada is actual very legally compliant or regulated. Most of them are acting without any special kind of permission for their business, so this is something that the market wants to fix.
The Case With QuadrigaCX
It is not a great exaggeration to believe that QuadrigaCX was the main reason why these agencies have decided to start regulating the industry. The exchange made its investors lose a lot of money as its CEO died and took the private keys of the company’s wallets with him to the grave.
Gerald Cotten died last year and did not leave any way for his staff to access the funds. At the moment, QuadrigaCX owes about $190 million USD to its clients.
Because of this story, it is no secret that the Canadian authorities are concerned with the risks that this kind of business could bring to the clients.