Canada passes crypto guidelines for exchanges according to a report by cointelegraph. In the recommendations, the regulating body Canada Securities Administrators providing a framework for dealing with common issues faced by users in a crypto exchange. These include the process and safeguard with regard to security issues like theft and insolvency.
From the Report
CSA staff (we or staff) are issuing this notice to provide guidance on certain factors we consider to determine whether securities legislation applies to any entity that facilitates transactions relating to crypto assets, including buying and selling cryptoassets (collectively, Platforms). On March 14, 2019, in Joint CSA/Investment Industry Regulatory Organization of Canada Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms, we stated that if cryptoassets that are securities or derivatives are traded on a Platform, such Platform would be subject to securities legislation. In addition, if a Platform trades contracts or instruments that are derivatives based on crypto assets, the Platform would also be subject to securities legislation.
In some cases, the crypto asset is clearly a security, for example, a tokenized security that carries rights traditionally attached to common shares such as voting rights and rights to receive dividends. In other cases, the crypto asset is a derivative, for example a token that provides an option to acquire an asset in the future. Securities legislation may also apply to Platforms that facilitate the buying and selling of cryptoassets, including crypto assets that are commodities, because the user’s contractual right to the crypto asset may itself constitute a derivative.
In some jurisdictions, this right may be considered a security, such as an investment contract or evidence of indebtedness or an evidence of title to or interest in the assets or property of another person. When does securities legislation not apply? Staff is aware that some Platform operators are of the view that the Platforms they operate are not subject to securities legislation because they only allow for transactions involving cryptoassets that are not,in and of themselves,derivatives or securities.
However, based on our analysis of how trading occurs on Platforms, we note that some Platforms are merely providing their users with a contractual right or claim to an underlying crypto asset, rather than immediately delivering the crypto asset to its users. In such cases, after considering all of the facts and circumstances, we have concluded that these Platforms are generally subject to securities legislation.
Platforms would not generally be subject to securities legislation if each of the following apply:
- the underlying crypto asset itself is not a security or derivative; and
- the contract or instrument for the purchase,sale or delivery of a crypto asset
- results in an obligation to make immediate delivery of the crypto asset,and
- is settled by the immediate delivery of the crypto asset to the Platform’s user according to the Platform’s typical commercial practice.
We welcome innovation and recognize that new fintech businesses may not fit neatly into the existing framework. The CSA Regulatory Sandbox is an initiative of the CSA to support fintech businesses seeking to offer innovative products, services and applications in Canada. It allows firms to register and/or obtain exemptive relief from securities law requirements, under a faster and more flexible process than through a standard application, in order to test their products, services and applications throughout the Canadian market, generally on a time-limited basis. Canada passes crypto guidelines for exchanges to make it easier for crypto users.
