Binance exits Canada citing increased regulation

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Cryptocurrency exchange Binance has announced that it will be exiting Canada, citing “new guidance related to stablecoins and investor limits.”

On May 12, digital asset exchange Binance confirmed it would be exiting Canada amid increased regulatory requirements introduced by the Canadian Securities Administrators (CSA), the umbrella organization for the country’s securities regulators.

The exchange announced the move on Twitter, stating: “Binance will be joining other prominent crypto businesses in proactively withdrawing from the Canadian marketplace.”

The company’s statement also mentioned new guidance related to stablecoins and investor limits, which it said “makes the Canada market no longer tenable for Binance at this time.”

The CSA revealed the new regulatory requirements back in February, and since then, Binance has put off making its decision as long as possible while it attempted to explore other avenues with regulators. However, as of Friday, the exchange said, “it has become apparent that there are none.”

Canada ups requirements for ‘crypto’ trading platforms

The withdrawal of regulation shy Binance from Canada has been on the cards for a while.

In August of last year, the CSA announced that it expected “commitments” from unregistered digital asset trading platforms operating in Canada while they pursue registration with the regulator. These commitments came in the form of a pre-registration undertaking (PRU), which included terms and conditions consistent with those placed on registered platforms.

Then in December, the CSA upped the ante, announcing: “Following recent events in the crypto market, the Canadian Securities Administrators (CSA) is strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada.”

These expanded requirements eventually came into force on February 22, when the CSA published its “Changes to enhance Canadian investor protection,” which stated that digital asset firms planning to operate in Canada must be registered or abide by the updated PRU while they await approval.

The expanded PRU required, among other things, digital asset trading platforms to follow custody rules, ensure segregation of digital assets held for local clients and refrain from offering margin, credit, or other forms of leverage (see below for a full list of enhancements to the PRU). The PRU also mandated that CSA approval be sought before allowing users to deposit or buy stablecoins.

Binance is not registered in Canada, and if it was planning on doing so, it seems the updated PRU requirements were a deal breaker, particularly concerning stablecoins and investor limits.

Unfortunately for Binance, the stablecoin sticking point seems unlikely to change, as the CSA said in its February announcement that it was “of the view that stablecoins, or stablecoin arrangements, may constitute securities and/or derivatives.”

The CSA also gave non-compliant and non-registered digital asset trading platforms 30 days to align with the new rules and provide a revised PRU, a deadline which would have passed on March 24.

According to the Ontario Securities Commission, a provincial regulator under the umbrella of the CSA, several digital asset exchanges did enter into the new PRU on March 24, including Coinbase (NASDAQ: COIN), Kraken, and Gemini; Binance was not one of them.

The exchange stated on Friday that it was sending out emails to Canadian users detailing its next steps and how its withdrawal from the country will impact accounts.

Rules summarized

The expanded PRU commitments required from unregistered digital asset trading platforms are summarized as follows:

– Enhanced commitments tied to the custody and segregation of “crypto” assets held on behalf of Canadian clients.
– Enhanced commitments to preclude unregistered “crypto” trading platforms (CTP) from using digital assets held on behalf of Canadian clients.
– A ban on offering margin, credit, or other forms of leverage to any type of client in connection with the trading of crypto contracts or crypto assets.
– Restrictions on CTPs relying on digital assets, including native tokens, to determine their capital.
– Enhanced commitments about the filing of financial information with the CSA regularly.
– Enhanced commitments concerning the retention of a qualified Chief Compliance Officer (CCO) during the pre-registration process.
– A ban on CTP’s clients buying or depositing stablecoins through crypto contracts without the prior written consent of the CSA.
– A ban on trades in crypto contracts based on proprietary tokens, except with the prior written consent of the CSA.

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Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.