Canadian Securities Administrators issues stricter crypto trading platform requirements

Unregistered platforms will now have a deadline

Canadian Securities Administrators issues stricter crypto trading platform requirements

The Canadian Securities Administrators (CSA) will tighten its provisions for crypto trading platforms operating in Canada following the recent collapse of the FTX, according to a statement released last week.

Last August, the CSA asked crypto trading platforms to provide a pre-registration undertaking (PRU) to their principal regulator to continue operations while their application is reviewed. By giving these undertakings, crypto trading platforms agree to comply with terms and conditions that address investor protection concerns and are consistent with requirements currently applicable to registered platforms.

Now, the CSA has become stricter with time, given the nature of this high-risk investment.

The financial regulator will provide a deadline for PRU delivery. If the deadline is unmet, the CSA says, regulators will bring the platform into compliance with securities law through enforcement action. This approach will also apply to firms based outside the country but accessible to Canadian citizens.

Other measures include keeping client assets separate from proprietary business assets, ensuring client assets are handled with an appropriate custodian, and not allowing Canadian users to employ margin or leverage.

The announcement of stricter requirements came just after the CSA warned Canadian investors about the heightened risks of investing in digital assets, especially for retail investors.

“There are unregistered crypto asset trading platforms accessible by Canadians where essential safeguards that protect investors’ assets from loss, theft or misuse may not be in place,” the CSA wrote in a release last November 21

The CSA members will publish the complete and updated approach in the future and contact registered crypto trading platforms one by one to discuss the application of the expanded terms and conditions. The CSA comprises securities regulators from each of the 10 provinces and three territories in Canada.

In the meantime, the CSA continues to monitor the presence of stablecoins in Canadian capital markets, noting its prohibition as either securities or derivatives in its 2022-2025 CSA Business Plan.

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