On March 14, 2019, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) released a joint discussion paper (Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms) with the aim to modify regulations to the special risks posed by cryptocurrency exchanges through a “New Proposed Platform Framework.”
As Bitcoin Magazine reports, the paper comes in response to calls from some crypto businesses for more regulatory clarity as well as calls from Canadian mainstream media for better oversight and regulation of cryptocurrency businesses, especially cryptocurrency exchanges, in the wake of QuadrigaCX.
To gain insight into the paper and its implications, author Jessie Willms turns to industry experts, including Osler’s Evan Thomas, counsel in the firm’s Litigation Group and a member of the firm’s cross-disciplinary team that advises on issues relating to blockchain technology and crypto-currencies. Evan recently authored an Osler Update with Osler partners Larry Ritchie and Lori Stein that discussed the consultation paper, as well as the potential benefits of the proposed framework and possible operational challenges.
“A big issue with this proposal is that it is not clear as a legal matter that Canadian securities regulators have jurisdiction to regulate platforms for trading bitcoin and other crypto-assets that are not securities,” Evan tells Bitcoin Magazine. In the Osler Update, the authors expressed their hopes regarding the proposed platform regulation: “[t]o ensure that the CSA does not exceed its jurisdiction over the cryptoasset industry, we are hopeful that Platform regulation will provide further clarity regarding types of cryptoassets and related services that are not subject to securities regulation, such as tokens that are not investment contracts or derivatives and non-custodial cryptocurrency wallets.”
Bitcoin Magazine reports that the discussion paper is the third time the Canadian government has held a consultation round with the cryptocurrency industry. Evan states that this recent initiative is a “more direct response to cases like that of QuadrigaCX.” “Earlier regulation was directed at combating money laundering and terrorist financing. This proposed framework is motivated by investor protection concerns; that is, trying to protect crypto users who use custodial exchanges from risks like hacking, embezzlement and market manipulation,” explains Evan.
In the Update, the authors emphasized further benefits of regulation, “including better relationships with the banking sector”: “By establishing a regulatory regime for Platforms, the Framework may make it easier for Platforms to obtain and maintain commercial relationships with banks and other financial institutions, which remains an ongoing challenge for certain Platforms.”
For more information, read author Jessie Willms’ article “After QuadrigaCX: New regulations for Canadian exchanges are in the works” in Bitcoin Magazine.