Canada to Regulate Crypto-Asset Trading Platforms


On March 14, 2019, the Canadian Securities Administrators (CSA) and Investment Industry Regulatory Organization of Canada (IIROC) published the consultation paper Joint Canadian Securities Administrators/Investment Industry Regulatory Organization of Canada Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms. The consultation paper seeks input from the fintech community, market participants, investors and other stakeholders on how regulatory requirements may be tailored for crypto-asset trading platforms operating in Canada.

Early in 2018, at its peak, the total value of crypto assets was estimated by one source at more than US$800 billion.  While the value has since fallen, trading volumes remain significant. Today, there are over 2000 crypto assets that may be traded for government-issued currencies or other types of crypto assets on over 200 platforms that facilitate the buying and selling or transferring of crypto assets (Platforms). Many of these Platforms operate globally and without any regulatory oversight.

Platforms, depending on how they operate and the crypto assets they make available for trading, may be subject to securities and/or derivatives regulation. 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.

The consultation paper seeks input on a number of areas that will assist in determining appropriate requirements for Platforms. 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. The CSA and IIROC continue to engage with international regulators about their approach to platforms, and welcome input on a variety of regulatory approaches that exist in this area.

Comments on the consultation paper should be submitted by May 15, 2019.