Canada Expands Oversight Into Crypto Platforms

Canada has joined a list of countries increasing oversight into cryptocurrencies following the FTX collapse.

The Canadian Securities Administrators (CSA) said in a Monday (Dec. 12) news release that it is “strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada.”

Those expanded regulations include requirements to hold Canadian clients’ assets with an appropriate custodian and “segregate these assets from the platform’s proprietary business,” as well as a ban on offering margin or leverage for any Canadian customer, according to the release.

The CSA had announced in August that it expected commitments from unregistered crypto trading platforms operating in Canada while they sought registration. These commitments were to be made in a pre-registration undertaking (PRU), which included terms and conditions consistent with the requirements for registered platforms.

“If a platform currently subject to securities legislation in Canada does not deliver a PRU to its principal regulator or cease operating, the CSA will consider all applicable regulatory options to bring the platform into compliance with securities law, including enforcement action,” the release stated.

The CSA will soon give platforms a deadline to deliver their PRUs, according to the release. The agency said platforms that are based outside of Canada but still accessible to Canadians are considered “as operating in Canada for the purposes of securities regulation.”

The release did not mention FTX by name, but the company said the move is prompted by “recent events in the crypto market.”

And while other crypto companies have struggled lately, much of that trouble stems from the collapse of FTX, which culminated Tuesday with founder Sam Bankman-Fried being accused of fraud by the Securities and Exchange Commission (SEC).

Since FTX declared bankruptcy, officials in the U.S. and around the world have spoken of a need for stronger controls on the industry.

This week saw comments from current FTX CEO John L. Ray III — who took over for Bankman-Fried — that the company’s record keeping was “near-zero” for what “one would expect to find in a multibillion-dollar international business.”

“The FTX situation is shot through with oversight failures,” PYMNTS wrote earlier this month. “The unfortunate reality of the company’s demise provides lawmakers with a bittersweet opportunity to understand the distinctions between centralized crypto exchanges like FTX, and decentralized finance (DeFi) exchanges which operate on-chain across transparent and immutable ledgers that aren’t under the control of any single party.”

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