Platforms facilitating some types of trade in Bitcoin and other cryptocurrencies to Canadians are getting some guidance from regulators looking to ensure the sometimes-freewheeling nascent business is being adequately regulated.
The Canadian Securities Administrators (CSA), the council representing provincial and territorial securities regulators across the country, on Monday unveiled new standards meant to offer clarity to platforms seeking to comply with securities legislation.
Not all crypto platforms with need to adhere to the guidelines — only ones trading in securities or derivatives.
But depending on how the platform operate, the services might become a security or derivative depending on whether it’s providing immediate delivery.
“Securities legislation may also apply to platforms that facilitate the buying and selling of crypto assets, including crypto assets that are commodities, because the user’s contractual right to the crypto asset may itself constitute a derivative,” the CSA said in a January notice.
“In some jurisdictions, this right may be considered a security, such as an investment contract or evidence of indebtedness right to the crypto asset may itself constitute a derivative or an evidence of title to or interest in the assets or property of another person.”
In most provinces, cryptocurrency platforms that need to be regulated are expected to register as investment dealers and enroll as members of Investment Industry Regulatory Organization of Canada (IIROC), the self-regulatory organization overseeing investment dealers.
But in B.C., Alberta, Saskatchewan and Manitoba, companies won’t necessarily have to join IIROC, as those provinces will be considering other arrangements.
The CSA acknowledged it may take some time for the platforms to register as investment dealers. In the meantime, platforms are expected to comply within interim guidelines.
For companies offering services in B.C., that interim period is expected to last two years.
The CSA said the goal of the new guidance “is to ensure there is a balance between needing to be flexible in order to foster innovation in the Canadian capital markets and meeting our regulatory mandate of promoting investor protection and fair and efficient capital markets.”
CSA chairman and president Louis Morisset is urging platforms to reach out to local securities regulators to discuss the registration process and address the requirements. Each province and territory in Canada has its own regulator.
The Ontario Securities Commission (OSC) said all companies offering services to residents within the province must contact the OSC by April 19 to ensure compliance or face potential regulatory action. No such deadline has been set by the B.C. Securities Commission.
“The guidance in our notice details steps platform operators need to take to comply with securities legislation as they prepare to fully integrate into the Canadian regulatory structure,” Morisset said in a statement.
“To bring their operations into compliance, [platforms] should contact their local securities regulator now to discuss the registration process and address applicable requirements.”
Morisset said domestic as well as foreign platforms must ensure they are complying with the country’s securities legislation.
“Failure to do so could result in CSA members pursuing enforcement action,” he said.