Canada’s new guidance targets advertising and social media for digital currency exchanges

Canada’s new guidance targets advertising and social media for digital currency exchanges

The Canadian Securities Administrators (CSA), which covers individual securities regulators in Canada, has published new guidance aimed at digital currency exchanges advertising and the use of social media. 

The new guidance, published in partnership with the Investment Industry Regulatory Organization of Canada (IIROC), aimed to provide “guidance for [crypto trading platforms or CTPs] on how requirements under securities legislation1 and IIROC rules relating to advertising, marketing and the use of social media may apply to them.” 

In particular, the guidance addresses some of the marketing practices commonly used by securities exchanges, flagging them as encouraging investors to engage in excessively risky trading behaviors which can result in significant losses, as well as bringing investment markets “into disrepute.”

We are concerned that some of these strategies may inappropriately encourage investors to engage in excessively risky trading, taking on risks that they would normally avoid. We wish to remind CTPs that registered dealers have an important role as gatekeepers of the integrity of the capital markets. They should not, by act or omission, engage in or facilitate conduct that brings the market into disrepute.”

In particular, the guidance takes a swipe at so-called “gambling style” promotions used by some digital currency exchanges, which it says are responsible for driving some investors into unwise investment behaviors.

The guidance comes amid a wider crackdown from regulators across Canada against unregulated digital currency services, most recently with regulators in Ontario taking action against digital currency exchange Poloniex. Shortly thereafter, Binance withdrew from serving users in Ontario, ostensibly in response to the toughening climate there for digital currency businesses. 

The new guidance presents a framework for digital currency businesses operations across the country in regard to marketing, advertising, and social media practices. While it stops short of legislating, the guidelines nevertheless give an indication as to where regulators are in relation to these practices.

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