The Canadian Authorities Issues New Guidance for Digital Currency Trading Platforms

News / 17.01.2020

The government of Canada has issued new guidance towards the determination of the digital currency trading platforms to come under derivatives law.

On January 16, The Canadian Securities Administration (CSA) released a document explaining the new provisions. The document is entitled “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets.”

Generally, 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.

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 don’t do immediate transfer to a user. Hence, cryptocurrency trading platforms doing such are affected by securities legislation, and belong to derivatives laws.

Securities laws are inapplicable to cryptocurrency exchanges on which the fundamental cryptocurrency asset is not a security or derivative, and on which there is immediate delivery of cryptocurrency assets.

Before now, United States and Canadian securities regulators have started probing likely fraudulent crypto investment programs. The probe is part of “Operation Cryptosweep” efforts of the North American Securities Administrators Association’s (NASAA). It led to numerous investigations of initial coin offerings and investment products related to cryptocurrency.

Last month, the NASAA maintained that crypto investment is one of the leading five investor threats this year. NASAA president Christopher Gerold said investors need to understand the investments they want to try and the individuals involved. He continued that they 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 or finite availability.

Featured image courtesy of Crowdfundinsider. Source: Cryptopress.

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Born in Bucharest, Marius is the founder of Crypto Adventure. Since his first contact with Bitcoin and cryptocurrencies, he never stopped believing that they are one of the most important innovations of our time, which will forever change the way business is done.