Capital market regulators in Canada are planning to establish new rules to curb the risks associated with cryptocurrency trading platforms. This follows the sudden death of Gerald Cotten, founder and chief executive officer of crypto exchange Quadrigacx, which led to about $145 million in frozen or missing cryptocurrencies.
Tailored Requirements for Crypto Exchanges
In a joint new consultation paper on March 14, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) spoke of the need to come up with tailored requirements to address the “novel features and risks” of digital currency exchanges.
“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,” the regulators detailed.
“We endeavor to facilitate innovation that benefits investors and our capital markets, while ensuring that we have the appropriate tools and understanding to keep pace with evolving markets,” they added.
Cotten died in India on Dec. 9 without revealing the keys to cold wallets containing CAD $190 million (~US $145 million). A Nova Scotia Supreme Court judge in February granted Quadriga’s request for creditor protection from as many as 115,000 customers. Investigations by Ernst & Young, the court-appointed monitor in the case, have given little hope the funds will ever be recovered.
However, the Quadrigacx saga has exposed a gap in the Canadian cryptocurrency industry regulation system, prompting investors to query who would be held accountable in the event of a loss. In the past few months, industry players and other concerned stakeholders have increased calls for regulation,