Canadian Securities & Crypto Guidelines
Canadian Securities Administrators Provide Clarity With Additional Crypto Guidelines
In recent years, owing to a meteoric rise in the popularity of cryptocurrencies like Bitcoin, regulators all around the world have started taking regulations for this nascent industry very seriously.
As the overall ecosystem is still developing, regulators are trying to comprehend the complex issues so that proper regulations can be constructed which will help minimize the risks while leveraging the benefits at the same time. The most significant goal, however, is to provide regulatory clarity so that businesses can proceed accordingly. To buy bitcoin in Canada will be changing as time and regulations progress.
Canadian regulators have made a lot of progress in this regard. They have been looking to propose a regulatory framework for Canadian cryptocurrency exchanges since last year and recently, they have published additional guidelines for the same.
New Guidelines Published
On the heels of a consultation paper that the Canadian Securities Administrators (CSA) had released in March of last year, the regulatory body has published recently a new set of guidelines for cryptocurrency platforms. The guidelines are meant to help them determine when securities laws will be applicable to them.
The regulators also mentioned that they are aware that the crypto landscape is an evolving one and the underlying technologies are still being developed. As such, they understand the need for providing clarity to businesses dealing in cryptocurrencies. Clear frameworks are indispensable in supporting FinTech companies that are bringing cutting edge innovation in terms of services and applications to Canada.
The contributions of these FinTech businesses could yield gargantuan returns in the new decade as the crypto industry begins to go mainstream. Currently, only the more technology-savvy people and high net-worth investors are involved but this could change in the coming years as retail players begin to get involved in hordes. When they do arrive, there needs to be a mature ecosystem and clear regulations in place.
Although consultations are still ongoing, the new guidelines will provide a necessary buffer so that Canadian bitcoin exchanges and other platforms can begin to streamline their current operations accordingly. These will be of immense help for any new entrants into the industry as well. They could proceed with compliance from day one.
The CSA and the Investment Industry Regulatory Organization of Canada have been jointly researching the crypto industry and the crypto assets trading platforms and have stated that the guidelines are a preliminary result of their efforts. Their review of the comments and responses to the March consultation paper is still going on and they plan to publish a summary along with more guidelines for the platforms later this year.
When Do Legislation’s Not Apply?
The new guidelines provide a comprehensive list to illustrate when existing securities regulations will apply to crypto trading platforms and when they won’t apply. They also provide examples of situations so that there is no ambiguity among businesses.
Starting off, the CSA has clearly stated that if a particular cryptocurrency is itself a security or a derivative, the securities laws will automatically apply. They will also apply if the purchased cryptocurrencies are not immediately delivered to the purchaser or user. Buying bitcoin in Canada or selling bitcoin in Canada will have to be a seamless transaction with minimal wait time for completion.
Below is a list of the criteria that must all be met for securities laws to not apply:
a Platform offers services for users to buy or sell bitcoin and does not offer margin or leveraged trading
users send money to the Platform to purchase bitcoin at a given price
the terms of the transaction require that the entire quantity of bitcoin purchased from the Platform or counter party seller be immediately transferred to a wallet that is in the sole control of the user, and the transfer is immediately reflected on the Bitcoin blockchain
there is no agreement, arrangement or understanding between the parties that would allow the transaction to be settled other than by immediate transfer of bitcoin
the Platform’s typical commercial practice is to make immediate delivery in accordance with the terms of the transaction, and for the Platform or its affiliates not to have ownership, possession or control of the user’s bitcoin at any point following the transaction
the sale or purchase of bitcoin is not merely evidenced by an internal ledger or book-entry that debits the seller’s account with the Platform and credits the crypto assets to the user’s account with the Platform, but rather, there is a transfer of the bitcoin to the user’s wallet; and
the Platform or counter party seller retains no ownership, possession or control over the transferred bitcoin.
Departure From The Past
For the past several years, a lack of clarity on when securities laws apply to crypto trading platforms and crypto transactions in Canada had caused a major headache for startups and businesses involved in this industry. This has not only affected the FinTech startups, but it had also put retail investors at risk.
However, CSA’s desire to understand the implications of emerging technologies on the financial and economic systems of the country and the world at large, led to them making more concrete decisions. They correctly understood the transformation effects of not only cryptocurrencies like Bitcoin but also distributed ledger technologies (DLT) in general. They even stated that DLT could transform the landscape of the financial industry.
The recent guidelines and more crypto-specific regulations in the future will be necessary to avoid fiasco’s like the one involving QuadrigaCX crypto exchange, which lost access to almost $200 Million CAD after its CEO passed away in India. Scenarios like that put everybody’s hard-earned money at risk and this will simply not be acceptable in the coming times when billions will be at stake.
Canada has taken an important step forward in the crypto world and other countries might take some cues to do the same. From all the current and future potential developments, it seems like the Canadian bitcoin landscape will continue to flourish and become one of the most significant ones in the world.
No one is certain how or when Canadian Securities & Crypto Guidelines will change but rest assure, changes are coming.
Pccex cryptocurency exchange abides by the rules and regulations of Fintrac and keeps up to date with any new regulations that are placed on the cryptocurrency industry.