Canadian regulator tightens crypto regulation
2022.11.26 10:10
Canadian regulator tightens crypto regulation
Budrigannews.com – Coinsquare, based in Toronto, became the first cryptocurrency trading company to be registered as a dealer with the Investment Industry Regulatory Organization of Canada (IIROC) in October.
This is significant because the Canadian Investment Protection Fund now protects Coinsquare investors’ funds in the event of bankruptcy, and the exchange is required to regularly report its financial situation. This news brings to mind the peculiarities of Canadian crypto regulation.
Although the licensing process for virtual asset providers is still quite stringent, the country is experimenting with crypto exchange-traded funds (ETFs), pension fund investments, and central bank digital currency (CBDC) efforts ahead of the neighboring United States.
Coinsquare, the cryptocurrency asset trading platform with the longest history in Canada, benefits from its new legal status because none of its rivals can currently claim the same legal status. All other local players must be a “restricted dealer” by publication time, indicating that they have submitted their registration bid and are awaiting IIROC’s decision. In 2021, IIROC and the Canadian Securities Administrators (CSA) introduced the Guidance for Crypto-Asset Trading Platforms. Businesses dealing with security tokens or crypto contracts are required to register as “investment dealers” or “regulated marketplaces” under this regulation.
All local businesses have been given a temporary period of two years during which they should begin the registration process and, in some cases, obtain the temporary registration as a “restricted dealer.”
The “restricted dealers” who have been granted a two-year operating grace period during the ongoing registration process are mostly local businesses like Coinberry, BitBuy, Netcoins, and Virgo CX. These businesses still have the right to facilitate the purchase, sale, and holding of crypto assets; however, the stringent compliance procedure that is required for them to continue operating after 2023 lies ahead. Coinsquare, for instance, had to fund a trust account at a Canadian bank and get an insurance policy that covered losses of crypto assets.
Any noncompliance has been closely monitored by the prosecutors. Bybit and KuCoin were fined by the Ontario Securities Commission (OSC) in June 2022 for operating unregistered crypto asset trading platforms and violating securities laws.It obtained orders prohibiting KuCoin from participating in the capital markets of the province and imposing a fine of more than $1.6 million on the exchange.
On the other hand, some adoption cases in Canada seem out of place in the United States.For instance, there are dozens of crypto exchange-traded funds (ETFs) available for investment in the nation, whereas Grayscale is still fighting the Securities and Exchange Commission (SEC) in court for the right to launch its first ETF. The OSC for Purpose Investments approved the first Bitcoin (BTC) ETF for individual investors in 2021. The fact that the Purpose Bitcoin ETF has amassed approximately 23,434 BTC is actually a prominent sign of the bear market.It was worth about 41,620 BTC in May 2022. In June, investors withdrawn approximately 24,510 BTC, or 51% of the Purpose Bitcoin ETF’s asset under management, in a single week. This was the biggest outflow from the fund.
When the largest pension funds in Canada began investing in digital assets, it marked yet another milestone in the adoption of cryptocurrencies in the country. One of the largest pension funds in the French-speaking province of Quebec, the Caisse de Depot et Placement du Québec, made a $150 million investment in Celsius Network in 2021.
The Ontario Teachers’ Pension Plan announced its $95 million investment in FTX in the same month. Sadly, this information did not hold up well over time because both businesses have since failed and both pension funds have had to write off their investments. In light of this, the U.S. Department of Labor’s advice to employers not to use pension funds with Bitcoin or other cryptocurrencies may now seem like a prudent precaution.
Canada is one of the most popular places in the world for crypto mining because of its cold climate, cheap electricity, and light regulation. It was responsible for 6.5 percent of the global BTC hash rate in May 2022. Nonetheless, this fall, the firm overseeing power across the Canadian area of Quebec, Hydro-Québec, mentioned the public authority to set the organization free from its commitment to drive crypto excavators in the region. The argument goes that crypto will put pressure on the energy provider because electricity demand is expected to rise in Québec.
Another area in which Canada has outpaced its southern neighbor has been the CBDC’s development.In collaboration with the Massachusetts Institute of Technology, the Bank of Canada launched a 12-month study on the design of the Canadian digital currency in March 2022.
The Bank of Canada released a research report in October that suggested a few specific CBDC archetypes as useful for organizing “the possible CBDC designs.”While “no decision made on whether to introduce a CBDC in Canada” was stated in March, the country’s most recent budget amendment includes a brief section titled “Addressing the Digitalization of Money.
“The government stated in the statement that consultations with stakeholders regarding digital currencies, stablecoins, and CBDCs will begin on November 3, although the specific stakeholders that will be involved remain a mystery.
The bill C-249 debate, which had the potential to become Canada’s formal legal framework for crypto, demonstrated a clear partisan divide on the subject.In February 2022, a member of the Conservative party and former Minister Michelle Garner introduced a bill to the House of Commons to “encourage the growth of the cryptoasset sector.
“The legislator proposed having Canada’s Clergyman of Money talk with industry specialists to foster an administrative structure pointed toward helping development around crypto three years after the bill’s section. The bill was not widely supported by fellow lawmakers, despite the crypto community’s expressed support. Members of other political parties, including the ruling Liberal party, attacked the proposal and the Conservative party during the second reading on Nov. 21–23, accusing them of promoting the “dark money system,” a Ponzi scheme, and bankrupting retirees. As a result, C-249 is now officially dead.
Pierre Poilievre, the leader of the Conservative party, received most of the criticism while Michelle Garner was introducing the bill.
Poilievre, a former Minister of Employment and Social Development, has advocated for tokens, smart contracts, and decentralized finance to increase financial freedom.He urged Canadians to vote for him as their leader earlier this year to “make Canada the blockchain capital of the world.”
Given the market’s general state and the failure of C-249, it is unlikely that Poilievre and the Conservatives will receive widespread support in Parliament for their pro-crypto efforts until the 2025 general elections in Canada. The Conservative party currently controls only 16 of the 105 Senate seats and 119 of the 338 House of Commons seats.
According to Julia Baranovskaya, chief compliance officer and co-founder of Calgary-based NDAX and a member of the team that founded the company, Baranovskaya told Cointelegraph that there are particular obstacles that the trading platform industry is working to overcome. The majority of stakeholders in the industry would like “clear guidelines and a risk-based approach. “Currently, the majority of Canada’s regulatory authorities have decided to apply the existing rules and regulations for the traditional financial industry.
However, Baranovskaya emphasized that regulators have increased their dialogue with the crypto industry in recent years. The Securities Commission has set up a sandbox and invited innovative businesses that offer alternative financial instruments and crypto asset trading platforms to join. The IIROC has also been leading a conversation with people in the industry to learn more about business models and how the current framework can be used with them.
However, the difficulties posed by the lack of crypto asset-specific regulations and the fragmented regulatory framework persist.Although the crypto industry is constantly changing, the product-based approach “would always stay a few steps behind” the majority of existing regulations.According to Baranovskaya:
“Understanding the underlying technology behind crypto assets and De-Fi products that work out a flexible but robust regulatory regime that can adjust to the ever-changing crypto asset space is essential.”
