Crypto platforms applying for registration in Canada will have to agree to tighter rules in the country, including a ban on margin and leverage trading.
Firms will also have to hold the assets of Canadian clients separately from their proprietary business, according to expanded terms outlined by the Canadian Securities Administrators (CSA) on Monday.
Crypto businesses were told in August that they needed to submit a pre-registration undertaking (PRU) to operate while pursuing full registration. A deadline by which PRUs must be received has not yet been announced but will be communicated to platforms “shortly,” a CSA release said.
But in light of what the CSA called “recent events in the crypto market,” a PRU will commit platforms to an enlarged set of rules and requirements.
The CSA said: “Crypto trading platforms giving these undertakings agree to comply with expanded terms and conditions that will include, among other things, requirements to hold Canadian clients’ assets with an appropriate custodian and segregate these assets from the platform’s proprietary business, as well as a prohibition on offering margin or leverage for any Canadian client.”
Canada’s crypto crackdown
As part of Monday’s announcement, the CSA reiterated its stance that crypto assets are highly speculative.
“Even with the adoption of these measures, crypto assets or financial products relating to crypto assets are high-risk investments,” the statement said. “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.”
Canadian authorities have taken a largely skeptical view of cryptocurrencies. Prime Minister Justin Trudeau has attacked opponents for promoting “questionable, reckless economic ideas” when it comes to crypto, while the country’s central bank warned that Bitcoin and other tokens are no way to “opt out of inflation.”
Early this year, the Government expanded anti-terrorism legislation to block Bitcoin donations to the so-called “Freedom Convoy” protest against Covid restrictions.
Meanwhile, securities regulators have been cracking down on unregistered firms, calling out major platforms like KuCoin and Binance by name for failing to get authorization.
But none of this has stopped local pension funds from being hit by some of the biggest blow-ups in crypto this year, with the Caisse de Dépôt having invested $150 million into collapsed lender Celsius, while the Ontario Teachers Pension Plan had $95 million in FTX.