Canadian financial regulators have plans to establish new rules to curb risks associated with cryptocurrency exchanges. The agency is considering preparing a set of tailored regulatory requirements that will address the risks and features of the platforms.
Don’t Fit the Existing Regulatory Environment
The regulators represented by the Canadian Securities Administration (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) published a consultative paper on March 14, 2019, seeking the fintech community’s input on how to develop regulatory requirements for cryptocurrency platforms.
The CSA noted that cryptocurrency trading platforms don’t precisely fit the existing regulatory environment since they have functions that resemble those of regulated exchanges while other functions resemble those of dealers, custodians and clearing agencies.
The regulators explained:
“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 […] 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.”
Increased Interest in Crypto Assets
The consultative paper has invited comments from stakeholders who include the financial technology community, investors, and market participants on the best way to tailor the requirements for Canadian-based cryptocurrency exchanges.
The initiative comes at a time where there is increased interest in crypto assets from governments, investors, and regulators since Bitcoin was created in 2009. Interested parties have until May 15, 2019, to submit their written comments.
The recent QuadrigaCX imbroglio must have highlighted that apparent lack of regulations in the Canadian cryptocurrency industry. The CEO of QuadrigaCX cryptocurrency exchange Gerald Cotten allegedly died in India last December without leaving any way for his staff member to access the computer keeping the exchange’s funds.