Regulating cryptocurrency exchanges: Unclear definitions – The Lawyer’s Daily

Lori Stein

Mar 3, 2020

In a recent article in The Lawyer’s Daily, legal writer Julius Melnitzer examines the current state of cryptocurrency regulation and the challenges that cryptoasset trading platforms are facing from a regulatory perspective. As he explains, guidance from the Canadian Securities Administrators (CSA) has been slow in coming and the direction that has emerged is somewhat incomplete. For expert input, Melnitzer relies on Osler’s Lori Stein, a partner in the firm’s Investment Funds and Asset Management Group.

“The uncertainty about whether cryptocurrencies should be regulated as a currency, commodities or securities continues both globally and especially in Canada,” Lori says. “One of the threshold issues is whether cryptoassets that are not securities should be regulated as such.

“In a bulletin released in January, the CSA suggests that platforms which do not immediately transfer ownership, possession and control of all cryptoassets purchased by customers are likely dealing in derivatives or securities, and will be the object of enforcement under securities laws,” she continues. “The CSA also provides guidance on their view as to when physical delivery actually happens.”

An added wrinkle, Lori explains, is that there is no context for the regulation of the platform as there currently isn’t a mechanism by which cryptoasset dealers can register with the Investment Industry Regulatory Organization of Canada (IIROC).

“So, what you have is a regulator prepared to enforce laws for which no framework is in place, which creates a great deal of uncertainty.”

If you subscribe to The Lawyer’s Daily online, you can learn more about the regulation of cryptoassets, including the Ontario Securities Commission’s October 2019 decision to allow 3iQ, a Canadian investment manager, to offer the world’s first publicly traded bitcoin investment fund, by reading Julius Melnitzer’s full article “Regulating cryptocurrency exchanges: Unclear definitions” in the March 3, 2020 edition.