With the collapse of FTX prompting global regulators to crack down on the crypto industry, Canadian Securities Administrators (CSAs) are no exception.
On Monday, the association announced an expanded set of rules related to cryptocurrency trading platforms in Canada, which would prevent them from offering margin or leverage trading to Canadian clients.
no more leverage
What Announced By the regulator on Wednesday, its new rules will apply to any platform within the country subject to securities legislation, including crypto trading platforms that have not yet registered.
Unregistered platforms will soon have a deadline for them to submit a pre-registration undertaking (PRU) to their main regulator, in which they agree to meet the requirements expected of already registered entities. If they don’t, they may face enforcement action.
The expanded terms for supported platforms include requirements to hold Canadian customer assets in the hands of “proper custodian” and to segregate those assets from company-owned business. They also prohibit “offering margin or leverage for any Canadian client.”
“Custodians will generally be considered qualified if they are regulated by a financial regulator in Canada, the US, or a similar jurisdiction with a financial regulatory and conduct oversight regime,” the regulator’s statement read.
Although the regulator did not mention FTX by name, it is widely understood that both custody and margin trading issues were key contributing factors to the exchange’s downfall. Specifically, bankruptcy attorney John Ray alleged under oath Tuesday that FTX mixed client assets with Alameda Research, where they were traded and lost on margin.
Multiple crypto firms including Celsius, Voyager and BlockFi have left spoiled this year after using client assets for margin trading, which contributed to some larger-than-expected drawdowns in the crypto market.
The CSA added that stablecoins, tokens that have a price tied to fiat currencies such as USDC and USDT, are viewed by the regulator as securities.
“Cryptocurrency trading platforms are reminded… that they are prohibited from allowing Canadian clients to trade or gain exposure to any crypto asset that is itself a security and/or derivative,” it stated.
Gary Gensler, head of the US Securities and Exchange Commission (SEC), has also postulated that stablecoins could constitute securities, along with most other cryptocurrencies. Only Bitcoin, in his opinion, can be definitively classified as a commodity.
While other politicians within the country once considered Ether to also be classified as a commodity, both Senator cynthia lummis and Chairman of the Commodities and Futures Trading Commission rostin benham They have recently flipped on this issue.
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