When cryptocurrency was first created in 2009 in the form of Bitcoin, there was some confusion about what it was and how it could be used. Still today, there are some questions surrounding cryptocurrency. Even regulations remain unclear. However, the Quadriga debacle and recent hacks are events that support the growing need for crypto-asset trading to be appropriately regulated.
Two government agencies are interested in seeing clearer rules and regulations guiding the trade of crypto assets in Canada. These agencies are the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC). Together, they have sought to remove some of the uncertainty by proposing a new framework for crypto-asset trading platforms.
In a news release sent on March 14, 2019, the regulatory bodies called for input from the fintech community as well as other stakeholders including investors and economic agents on how regulatory requirements may be designed specifically for crypto-asset trading platforms operating in Canada.
In their proposal paper, the agencies highlighted the fact that “digital assets” or “crypto assets” are still relatively new, yet they are changing the landscape of the financial industry with innovations such as distributed ledger technology.
Since the advent of crypto assets, investors, governments and global regulators have had increasing interests in the varying cryptocurrencies. Today, you can choose from over 2000 crypto assets that may be traded for government-issued currencies and there are over 200 platforms that will allow you to buy and sell these assets. Unfortunately, many of those 200 platforms are operated globally and without any oversight from regulators.
That is where the joint paper comes into play. The consultation between the two Canadian regulatory bodies is aimed at providing more transparency while trading on these platforms with the hope of achieving higher integrity in the crypto market. This will, in turn, offer more protection for investors. So says Louis Morisset, the Chair of the CSA and President and CEO of the organization responsible for financial regulation in the Canadian province of Québec, Autorité des marchés financiers.
In his statement, the CSA chair went on to say that so far, Canadian platforms have welcomed a tailored regulatory framework as it would help them in their efforts to increase customer confidence and expand their businesses not only in Canada but also globally.
In the release, there was also a statement from Andrew J. Kriegler, President and CEO of IIROC which read: “The emergence of digital and crypto assets continues to be a growing area of interest for regulators, investors and marketplaces – and, together, securities regulators are taking steps to deepen our understanding of this area.”
He added: “We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models while maintaining investor protection.”
Custody and verification of assets, price determination, conflicts of interest and crypto-asset insurance are a few of the areas that require input to determine what the appropriate guidelines for the trading platforms will be.
The Canadian Securities Administrators and Investment Industry Regulatory Organization of Canada pledged to continue to engage with international regulators regarding their approach to platforms, and welcome input on a variety of regulatory approaches that exist in this area. The proposal paper is available on both their websites and they invite stakeholders to submit comments by May 15, 2019.