Canada’s securities regulator tightens rules guiding digital asset service providers

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Stiffer regulations are coming to digital asset service firms operating in Canada following the recent implosions in the ecosystem. On December 12, the Canadian Securities Administrators (CSA) announced that it will expand the existing requirements for companies operating in the country.

In a public disclosure, the CSA said that the stricter regulations will be extended to international digital exchanges that are still accessible to citizens. Part of the new measures outlined by the regulatory agency includes prohibiting service providers from allowing customers to trade digital assets that are considered securities or derivatives.

The CSA acknowledged the use of stablecoins in the Canadian financial ecosystem, warning that their use and issuance could fall under securities laws. It placed the burden on service providers to decide whether or not stablecoins operate as derivatives and take care not to list them on their exchanges.

“Crypto trading platforms are expected to have established policies and procedures to determine whether each crypto asset they provide exposure to is a security and/or derivative,” the CSA’s statement read.

Under the new regime of rules, digital asset firms involved in holding customers’ digital assets are expected to employ the services of “an appropriate custodian” and take special care to separate the funds from the proprietary assets of the firm. The CSA’s new rules prohibit service providers from offering margin or leverage for users as an additional means to protect investors.

Seeking commitments from unregistered firms

At the moment, unregistered firms can still carry out business in Canada, but the CSA moved to demand several commitments from them back in August. The securities regulator ordered the firms to sign a pre-registration undertaking (PRU), requiring them to stick to the terms and conditions applicable to registered platforms.

While there is no deadline for firms to present their PRUs to their principal regulator, the CSA confirms that it is in the process of communicating a date to the firms operating in the industry.

“If a platform currently subject to securities legislation in Canada does not deliver a PRU to its principal regulator or cease operating, the CSA will consider all applicable regulatory options to bring the platform into compliance with securities law, including enforcement action,” the regulator said.

Binance, the largest digital asset exchange in the world, ran into trouble with Canadian authorities resulting in the signing of an undertaking that the firm would stop opening new accounts for users in Ontario.