Canadian Exchange Kraken Criticizes Proposed Crypto Regulations from CSA and IIROC Authorities
“Proposed Framework for Crypto-Asset Trading Platforms.”
In the paper, they pen down their objective for this venture. They say:
“We endeavor to facilitate innovation that benefits investors and our capital markets while ensuring that we have the appropriate tools and understanding to keep pace with evolving markets. The purpose of this joint CSA/IIROC Consultation Paper is to seek feedback from the financial technology community, market participants, investors and other stakeholders on how requirements may be tailored for Platforms operating in Canada whose operations engage securities law. We intend to use this feedback to establish a framework that provides regulatory clarity to Platforms, addresses risks to investors and creates greater market integrity.”
However, many are not too pleased with this decision. Kraken leads the charge in criticizing the move by the regulators.
Kraken strongly recommends against Canada imposing a security law framework on crypto currency exchanges in public response to the Proposed Framework for Crypto-Asset Trading Platforms published by the CSA and the IIROC #bitcoinca https://t.co/z2TgW3vjQu
— Kraken Exchange (@krakenfx) May 16, 2019
In the paper that is meant to scrutinize the regulatory proposal, they say:
“Payward Canada Inc., together with its affiliates (, operates an international digital currency exchange and custody platform. As an industry leader, Kraken supports efforts to ensure that the crypto marketplace is fair and orderly. That said, it is important to recognize, as the Regulators have done, the difference between crypto assets that are securities under existing Canadian law and crypto assets that operate solely as a form of payment, which we refer to herein as cryptocurrencies. For the reasons explained below, we believe that exchange platforms on which cryptocurrencies are traded should not be substantively regulated under the framework applicable to securities or derivatives.”
There are many things pointed out in the paper released by Kraken. They say that the advanced framework examines the contractual settlement within an exchange and a user as security which Kraken considers not to be.
They list down four factors which cement their position and shows that the customers indeed have the full ownership of their tokens.
- Contractual terms indicating that the relationship is in the nature of a custodial relationship;
- The customer has the right to dispose of the assets at any time by transferring them off of the Exchange;
- Contractual terms governing escheatment of the underlying asset;
- With respect to bank accounts holding customer funds, titling of the bank account as a “for the benefit of” (FBO) or “custodial” account, or similar wording.
There are various other points that the exchange makes. To read all of them, you can release their press release.