Canadian Crypto Firms Prohibited From Providing Leveraged Trading
- Canadian Securities Administrators (CSA) has prohibited crypto firms from providing leverage trading services.
- CSA stated that every crypto platform seeking registrading will need to sign an “undertaking” and segregate client and business funds.
- The firms will have to hold customers’ funds with a separate custodian to protect investors.
- Firms outside of Canada that servce its people will be considered to be operating in Canada and will have to provide the undertaking.
It was feared that the collapse of cryptocurrencies and related firms would give authorities a reason to crackdown on the digital asset space. The fears have come true as Canadian crypto firms are no longer allowed to provide leveraged trading services to the citizens of the country, and this announcement comes as a shocker to the crypto community.
The announcement comes from the Canadian Securities Administrators (CSA), an umbrella organization for the country’s 13 provincial and territorial watchdogs, according to a report. It is crucial to note that a co-ordinated regulatory regime has been implemented which will require every crypto platform in Canada seeking registration to sign undertakings related to investors protection before they are included under regulatory purview.
Authorities in Canada have learnt valuable lesson for the collapse of multi-billion dollar crypto company FTX and its relations with sister company Alameda Research. Regulators have charged the two for mismanaging clients’ funds and using them for running their own business. As a result, the CSA stated that then “undertaking” that crypto platforms will need to sign will include a pledge according to which the firms will have to hold customers’ funds with a separate custodian.
The pledge also includes the fact that the crypto firms seeking to operate in Canada will need to segregate the clients’ funds deposite and the funds used for conducting their businesses. Furthermore, the CSA has also prohibited these companies from offering margin or leverage for any Canadian client. Interestingly, margin or leverage trading of cryptocurrencies is quite risky and might result in severe losses for investors.
“Even with the adoption of these measures, crypto assets or financial products relating to crypto assets are high-risk investments. These risks could result from, among other things, crypto trading platform non-compliance with registration terms and conditions or undertakings, interconnectedness within the crypto sector, insolvency, hacks, price volatility, and uncertain value propositions for individual assets,” the CSA said.
Additionally, for the purpose of securities regulation and consumer protection, all the crypto platforms are situated outside of Canada but are serving people in the region will be considered to be operating in Canada and therefore, will have to follow all the rules as well.
As per a statement from the regulator, if the pre-registration undertaking is not provided to the CSA or the operations are not stopped in the region, “all applicable regulatory options to bring the platform into compliance with securities law, including enforcement action, (will be considered),.”
“Canadian investors are urged to exercise caution and consider seeking advice from a registered investment advisor before investing in crypto,” added the CSA.
Interestingly, it is also crucial to note that the CSA announced that it will bringing strict crypto regulations in mid-August, prior to collapse of FTX. However, it seems that the implosion of the crypto exchange has sped up the process.
“When we saw FTX, (we) around the CSA table got together immediately and asked ourselves, ‘What do we want to do here?’” said Stan Magidson, chair and chief executive of the Alberta Securities Commission, who was named CSA chair in July.
Meanwhile the founder of FTX, Sam Bankman-Fried, has been arrested, as reported earlier by Bitcoinwisdom. Authorities have also denied the former billionaire, bail, and he will remain in custody until February 8, 2023.
A crypto journalist with over 3 years of experience in DeFi, NFT, metaverse, etc. Parth has worked with major media outlets in the crypto and finance world and has gained experience and expertise in crypto culture after surviving bear and bull markets over the years.
