In brief
- The OSC says it reached out to Bybit in March but heard nothing.
- A hearing is scheduled for July 15.
Bybit, one of the world's top five crypto exchanges with $53 billion in trading volume in the last week, is in hot water with Canadian regulators—along with other prominent crypto trading platforms.
The Ontario Securities Commission (OSC) has charged the British Virgin Islands-registered company with "operating an unregistered crypto asset trading platform, encouraging Ontarians to use the platform, and allowing Ontario residents to trade crypto asset products that are securities and derivatives."
According to the OSC, it had requested on March 29 that Bybit contact it regarding how to bring the exchange into compliance with Ontario securities law but did not receive a reply. It's now added Bybit to its investor warning list and set a hearing date of July 15.
At that hearing, the commission will consider OSC staff recommendations calling for Bybit to cease securities trading and be prohibited from acquiring securities "permanently or for such period as is specified by the Commission." Staff also have recommended an administrative penalty of up to $1 million for each breach of Ontario securities law.
Earlier this month, the regulator took a similar enforcement action against another exchange, KuCoin. And last month, the OSC alleged Poloniex had not followed its registration process. Its argument is mostly the same in each instance: The exchange offers securities and derivatives to Ontario residents, meaning it must comply with the province's securities laws.
Securities are, generally speaking, financial instruments people can buy and trade for the purpose of turning a profit. Derivatives are a type of security that get their value from an underlying asset that may or may not be a security itself. For example, commodity futures and Bitcoin futures contracts are derivatives. These allow someone to set a buy/sell price for an asset in advance; it's a way of gambling on how much the price of an asset will increase or decrease.
Bybit is a primary investor in the Peter Thiel-backed BitDAO, which last week announced it had taken in $230 million to provide grants, liquidity, and technical expertise to decentralized finance projects. It has promised a cut of its futures contract trading to BitDAO.
Yes, but is it registered in Ontario?