Canadian Securities Administrators Open Consultation on Proposed Crypto Trading Ecosystem

Canada has joined a growing group of financial regulators seeking input on creating a regulatory compliant ecosystem for trading digital assets. Posted this week, the Canadian Securities Administrators (CSA), the group that represents all of the provincial regulators, posted a consultation in partnership with the Investment Industry Regulatory Organization of Canada (IIROC).

The IIROC is the national self-regulatory organization that oversees all investment dealers and their trading activity in Canada’s debt and equity markets.

The consultation paper seeks input from the Fintech community, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platforms operating in Canada.

Louis Morisset, CSA Chair and President and CEO of the Autorité des Marchés Financiers, said the proposed framework provides clarity while ensuring market integrity and investor protection:

“Platforms have told us that a tailored regulatory framework is welcome as they seek to build consumer confidence and expand their businesses across Canada and globally.”

Similar to most other jurisdictions, platforms may be subject to securities regulation.  The CSA states that depending on their structure, they may also introduce “novel features” that create risks to investors and Canada’s capital markets. These same risks may not be covered in existing law. Where securities legislation applies to platforms, the CSA and IIROC propose a tailored regulatory framework to address these novel features and risks.

Andrew J. Kriegler, President and CEO of IIROC, said the emergence of digital assets is of growing interest to investors and marketplaces as well as regulators:

“… together, securities regulators are taking steps to deepen our understanding of this area,” said Kriegler. “We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”

The consultation paper seeks input on a how to address custody and verification of assets, price determination, market surveillance, systems and business continuity planning, conflicts of interest, crypto-asset insurance, and clearing and settlement. These are issues that other jurisdictions are questioning too. While the emergence of security token offerings (STOs) may seem like a simple next step the reality of digital assets is they are more than a bit new.

The CSA and IIROC state that they welcome input on a variety of regulatory approaches that exist in this area. Comments should be submitted by May 15, 2019.

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