Canadian Securities Administrators Subject Crypto Exchanges to Securities Laws

Canada cryptocurrencies

Canadian Securities Administrators, an umbrella organization unifying various regulatory bodies, have issued a notice that instructs crypto trading platforms and the general public about the effects of securities regulations relevant to their actions.

The notice issued in called ‘Guidance on the Application of Securities Legislation to Entries Facilitating the Trading of Crypto Assets’ and is categorized as Notice 21-327.

The notice details that under certain conditions, the platforms will not be subjected to securities legislation. For example, the if the crypto asset is not a security or derivative, or the contract for the purchase or sale of crypto asset results in a demand to make immediate delivery and is settled by the delivery to the platform’s user.

Apart from the outline exceptions mentioned above, there is no further room for instances where the cryptocurrency exchange-based activity will not fall within the parameters of securities laws. The recently issued notice also highlights the problem that many active crypto exchanges within Canada are violating several regulations of securities.

The notice was concluded with the statement that the Canadian Securities Administrators welcome innovation and recognize that new fintech businesses might not fit in the traditional framework, hence CSA provides a more flexible process than the standard in order to grow the fintech industry further. The closing statement indicates that while CSA is establishing a firmer grasp on the regulations for new technology, they are in complete support of technological growth.

Canadian crypto companies like ZED Network Inc, TokenGX Inc, Rivemont Investment Inc and others have been exempted from existing laws and are cooperating with the regulators after being admitted to the CSA Sandbox mentioned in their notice.

Responding to Emerging Crypto-Related Regulatory Issues

The CSA mention the blockchain industry in their recent business plan which was released in the middle of last year, which makes the Notice 21-327 come as no surprise. The business plan spanned over the next three years of the organization and in the sixth goal, they mention the need to respond to technology-related emerging regulatory issues.

Under the Strategic Goal 6, there are four initiatives, out of which three are directly related to crypto assets. They include proposing a regulatory rule for crypto trading platforms, consider protective requirements regarding crypto assets and consider the capital raising and issues that may be unique to aspects of blockchain-based securities.

The Canadian Securities Administrators recognize the unique needs that come with the blockchain sector and hope to use Notice 21-327 as a stepping stone for a larger framework.

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