Canada studying crypto regulations to prevent another QuadrigaCX

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Looking to put some sensible regulations on the Canadian cryptocurrency industry, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) have announced they are considering regulations for crypto platfrms, Reuters reports.

This hits the newswires at the time Canada needs it most, as the QuadrigaCX scandal, where millions have gone missing amidst the death of its CEO, Gerald Cotten, and closure of what was once Canada’s biggest cryptocurrency exchange.

IIROC Chief Executive Officer Andrew Kriegler said in a statement:

“We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”

As we recently reported, a group of Canadian lawyers who have studied the QuadrigaCX case believe that under current Canadian regulations, the cryptocurrency exchange operated in a grey area and could not be persecuted for the way it was handing customer funds.

In a consultation paper released by both groups on March 14, they admit to this lack of regulation for cryptocurrency exchanges, noting:

“Currently there are no Platforms recognized as an exchange or otherwise authorized to operate as a marketplace or dealer in Canada. As such, the CSA has urged Canadians to be cautious when buying crypto assets.”

The consultation paper lays out that the CSA and IIROC are seeking to establish a regulatory framework, in cooperation with the existing exchanges, who welcome the trust it will help build in the crypto industry. They have already identified many risk factors for exchanges (which reads like the story of QuadrigaCX,) and other regulatory spaces they are studying for guidance. They also invite feedback on any of the topics covered in their paper.

New regulations will be too late for QuadrigaCX’s customers, who still don’t know the full story of where their money went, and perhaps never will. March 14 brought yet another confusing addition to the story.

We recently found out from Cotten’s widow, Jennifer Robertson, that the exchange’s law firm would have to withdraw from the case. Stewart McKelvey has now confirmed this in a letter delivered to the court. The court monitor, Ernst & Young, have informed the firm that they have a conflict of interest, but can’t tell them what that conflict is, possibly due to an obligation to confidentiality.

Forced to take them at their word, Stewart McKelvey is indeed withdrawing, but will stay on as the lawyers for Cotten’s estate and widow.