Canadian Securities Regulators Propose Regulatory Framework For Crypto Trading Platforms

News, Regulation | March 18, 2019 By:

The Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) have published a joint consultation paper proposing a regulatory framework for platforms that trade cryptoassets.

The Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms seeks input from the FinTech community, market participants, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platform. The proposed framework will apply to platforms located in Canada, as well as foreign platforms with Canadian participants, which might be eligible for exemptions if they are appropriately regulated in their home jurisdiction.

“This consultation outlines a proposed regulatory framework that provides clarity for platforms, greater market integrity and protection for investors,” said Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. “Platforms have told us that a tailored regulatory framework is welcome as they seek to build consumer confidence and expand their businesses across Canada and globally.”

The consultation paper seeks input on a number of areas, including how to address custody and verification of assets, price determination, market surveillance, systems and business continuity planning, conflicts of interest, crypto-asset insurance, and clearing and settlement.

“Platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities and/or derivatives regulation,” the paper said. “Depending on their structure, they may also introduce novel features that create risks to investors and Canada’s capital markets that may not be fully addressed by the existing regulatory framework. Where securities legislation applies to platforms, the CSA and IIROC are considering a tailored regulatory framework to address these novel features and risks.”

Andrew J. Kriegler, President and CEO of IIROC, said that the emergence of digital and crypto assets continues to be a growing area of interest for regulators, investors and marketplaces – and, together, securities regulators are taking steps to deepen their understanding of this area.

“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,” Kriegler said.

The CSA and IIROC said that they welcome input on a variety of regulatory approaches that exist in the crypto space. Comments should be submitted by May 15.