Canadian Authorities Issue New Crypto Guidelines for Trading Platforms
The Canadian government recently issued new guidance towards the cryptocurrency trading platforms’ determination to come under derivatives law. On January 16 2020, the Canadian Securities Administration (CSA) released a document explaining the new provisions. The document has the title “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets”.
In general, the agency differentiates between trading platforms that deliver cryptocurrency assets to users immediately, and the ones that hold the transaction of cryptocurrency assets until the user makes a later request.
A Summary of the New Crypto Guidelines
The CSA analyzed trading strategies on different platforms and observed that some platforms only offer their users a contractual right or claim to a cryptocurrency asset, and do not do immediate transfer to a user. Therefore, crypto trading platforms doing that are affected by securities legislation and belong to the derivatives law.
Securities laws are not applicable to crypto exchanges on which the fundamental cryptocurrency asset is not a security or a derivative, and in which there is immediate delivery of cryptocurrency assets.
More Previous Actions Regarding Crypto
Some time ago, the US and Canadian securities regulators started probing likely fraudulent crypto investment programs. The probe is part of “Operation Cryptosweep” efforts of the North American Securities Administrator’s Association’s (NASAA). It led to many investigations of initial coin offering and investment products related to cryptocurrency.
In December 2019, NASAA maintained that crypto investment is one of the leading five investor-threats in 2020. Additionally, NASAA president Christopher Gerold, noted that investors need to understand the investments they want to venture in, and the individuals involved.
He also said that investors should not yield to people who promise guaranteed high returns with little to no risk, or fall for deals presented with a false sense of urgency of finite availability.