Financial regulatory agencies in Canada have put forward a new proposal for regulating cryptocurrency exchanges in the country, weeks after the embarrassment caused by QuadricaCX.
On Thursday, March 14, The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) released a joint regulatory framework for the regulation of cryptocurrency exchanges in the country.
The agencies through a separate letter called on the wider cryptocurrency and fintech community to contribute to consultations on how regulations can be developed for cryptocurrency platforms.
CSA Chair Louis Morisset noted that cryptocurrency trading platforms have indicated that they are in support of a “tailored regulatory framework” which will they agree will “build consumer confidence and expand their businesses across Canada and globally.”
“[The] consultation outlines a proposed regulatory framework that provides clarity for platforms, greater market integrity and protection for investors,” Morisset explained.
Prompted to Action by the QuadricaCX Saga
As Smartereum reported, the management of Canadian exchange QuadricaCX sought protection from its creditors after it claimed it could not locate the funds of the customers after the death of its founder and CEO, Gerald Cotten. Cotten’s widow said he was the only one who had the keys to the wallets which contained $190 million in Bitcoin (BTC) and other cryptocurrencies. The investigations that followed has thrown up many discoveries most of which are utterly embarrassing.
The scandal that ensued at QuadricaCX exposed the lack of regulations in the industry and has seemingly forced Canadian authorities to take definitive steps towards regulation crypto platforms. The British Columbia Securities Commission (BCSC) said last month that QuadricaCX was not under its regulatory purview since it did not trade securities and derivatives.
“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 our understanding of this area,” Andrew J. Kriegler, President and CEO, IIROC acknowledged in the statement.
However, He advised:
“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.”
Contents of the Consultation Paper
Per the statement, the consultation paper focuses on the regulatory requirements for these crypto exchanges. These include 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.
Cryptocurrency exchanges are currently regulated in countries like Japan and South Korea. Japan’s Financial Service Agency (FSA) requires cryptocurrency exchanges to undergo strict licensing procedures—so far only 16 exchanges have received complete licenses. Typically, these regulations require crypto exchanges to meet Know Your Customer (KYC) and Anti Money Laundering (AML) standards to prevent undue risk to investors.
Contributors can answer up to 23 consultation questions outlined in the CSA and IIROC consultation paper. The consultations will be open to the public for comment until May 15.