The Canadian Securities Administrators (CSA) has issued an alert to investors when considering buying crypto assets through trading platforms. The CSA states that even though a platform may call itself an “exchange,” that does not mean it is complying with the securities regulatory regime. The CSA stated: “currently there are no crypto-asset trading platforms recognized as an exchange or otherwise authorized to operate as a marketplace or dealer in Canada.”
“We want investors to understand that just because a platform may advertise itself as an exchange, that does not mean the platform is complying with applicable securities regulations,” said Louis Morisset, Chair of the CSA and President and CEO of the Autorité des marchés financiers. “If it is not, investors should not expect to receive the same protections that are built into the securities regulatory framework applicable to exchanges or dealers, and should therefore be cautious.”
The CSA, the council of the securities regulators of Canada’s provinces and territories, co-ordinates and harmonizes regulation for the Canadian capital markets. In Canada, financial regulation mainly occurs at the provincial level leading to a fairly fragmented, and at times inefficient, regulatory environment.
The cryptocurrency exchange space is a global marketplace that, depending on the jurisdiction, may be lightly regulated – if at all. This has lead to some very high profile hacks and thefts. Meanwhile, more professional operations are emerging and more traditional trading marketplaces are looking to step into the highly profitable business.
The CSA notes that digital assets, created by ICOs or virtual currencies such as Bitcoin, are being traded on platforms that are advertising themselves as exchanges. In Canada, if a platform facilitates the trading of crypto assets or interests in crypto assets that are securities or derivatives, that platform is required to comply with securities legislation.
The CSA says Investors should be cautious when dealing with any crypto-asset trading platform because key investor protections may not be in place. These protections include secure handling of client funds, appropriate safekeeping and protection of assets, confidentiality safeguards for personal information, reliable processes for pricing and trading in crypto assets, appropriate investor pre-trade disclosures, and measures against market manipulation and other harmful practices.