Canada Tightens Crypto Regulations Post-FTX Collapse

In the wake of the FTX collapse, Canadian authorities are ramping up measures to ensure better protection for cryptocurrency investors across the nation. On December 13, the Canadian Securities Administrators (CSA), which oversees the country’s provincial and territorial securities regulators, issued an update outlining new regulatory requirements for all crypto trading platforms operating in Canada.

The CSA has broadened its supervisory approach, mandating that both local and foreign crypto trading firms comply with newly expanded rules which prohibit them from offering margin or leverage trading services to Canadian clients. Additionally, the new regulations require these firms to segregate custody of client assets from their own proprietary business operations.

As stated by the CSA, qualifying custodians must be regulated by a financial authority, either in Canada or in other jurisdictions with comparable supervisory frameworks for financial regulation. Alongside these updates, the CSA reinforced its previous communications issued on August 15, 2022. The authority had expected unregistered crypto trading platforms to make commitments towards registration via pre-registration undertakings.

This decisive action comes shortly after FTX signed an agreement to purchase the Canadian crypto platform Bitvo in June 2022, a move that was intended to bolster its global expansion. However, Bitvo successfully terminated the acquisition, allowing it to operate independently amid the fallout from FTX’s implosion. Bitvo’s CEO, Pamela Draper, had reported that the acquisition had not been completed as the firms were working to meet closing conditions, particularly securing regulatory approval from the Alberta Securities Commission.

Despite avoiding the acquisition, the ramifications of FTX’s operations in Canada are yet to be fully assessed, as noted by CSA communications manager Ilana Kelemen, who stated, “The impact in Canada, and in other jurisdictions around the world, will not be fully known for some time, including until the investigation in the U.S. Bankruptcy filing is complete.” Furthermore, Kelemen pointed out that none of the registered crypto asset trading platforms in Canada are currently offering margin trading.

In summary, these new regulations reflect Canada’s commitment to enhancing investor protection in the cryptocurrency sector and mitigating the impact of future incidents similar to that of FTX.