February 22, 2023

Crypto crackdown: Canada tightens rules on cryptocurrency trading platforms in wake of FTX collapse

The Ontario Securities Commission and other Canadian securities regulators are cracking down on unregulated cryptocurrency trading platforms in the wake of the spectacular bankruptcy of FTX.

Wednesday, the OSC and the national umbrella organization Canadian Securities Administrators announced details of a crackdown they had proposed in December.

Crypto trading platforms now have 30 days to assure regulators they’re following some specific rules if they want to keep serving Canadian clients. Among the rules are making sure client cryptocurrency is being kept separately from the firm’s own funds and a ban on offering margin trading or other forms of debt.

“Recent insolvencies involving several crypto asset trading platforms highlight the tremendous risks associated with trading crypto assets, particularly when conducted on unregistered platforms based outside of Canada,” said Stan Magidson, CEO of the Alberta Securities Commission and chair of the Canadian Securities Administrators.

If a crypto trading platform doesn’t provide an official “pre-registration undertaking” to follow the rules within 30 days, they’re expected to wind up their Canadian clients’ accounts, and block Canadians from accessing their services.

The rules are aimed at cryptocurrency platforms that haven’t yet registered with securities regulators in Canada, and would bring them up to the same standards as platforms that have registered; there are 11 platforms that have registered. Securities regulators are in discussions with roughly 20 more.

In November, FTX — which had been the world’s third-largest crypto-exchange — filed for bankruptcy, along with hedge fund Alameda Research, and dozens of other affiliated companies.

FTX founder Sam Bankman-Fried was subsequently arrested and charged with fraud and several securities violations.

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