Ontario Securities Commission Seeks Information on Digital Currency Trading Platforms
The Ontario Securities Commission (OSC) has announced that it is collecting relevant information about cryptocurrency trading platforms operating in the region in order to determine the legitimacy of their trading activities.
The OSC spokesperson, Kristen Rose, said that the commission had received numerous complaints about some of the platforms selling virtual currencies that might actually qualify as securities. It could be a violation of the securities laws of the province if any businesses (including crypto trading platforms) allow tokens or coins that are securities to be traded on them.
Trading Platforms are Not Exchanges
The commission is aware of various crypto trading platforms that operate in Ontario, and is now looking into their trading activities. According to Rose, none of these platforms to date has been recognized as a trading exchange, or received exemption from such recognition.
Therefore, any platform that provides for this type of crypto trading may be classified as a marketplace. If so, they would have to be in compliance with the rules that govern alternative trading systems or exchanges.
Under the law in Ontario, an exchange is required to apply for recognition by the OSC. In the application, the firm must describe its business activities, including operations, financial viability, access requirements, fees, and corporate governance.
At the moment, the platforms that the OSC is looking into do not have legal recognition as exchanges, and have neither been exempted from this regulation.
The OSC has, however, said that it is not exactly a formal investigation into the activities of the trading platforms. At the present stage, the commission is only “gathering information” related to the trading activities of the platforms.
Rise of Crytpo Exchanges and ICOs
The regulator’s move in Ontario comes in the midst of a rapid rise of cryptocurrency trading exchanges as well as ICOs (initial coin offerings) to launch new ones. Although bitcoin, the original cryptocurrency, is almost 10 years old, the swift escalation in the prices of new digital currencies in 2017 generated a heightened interest and led to the emergence of new startups to serve the needs of the new and expanding market.
Both the initial coin offerings and the exchanges have been operating in a somewhat grey area, which has prompted regulators to determine which types of regulations and securities laws would be applicable to the new offerings.
Focus on Crypto Regulation to Protect Consumers
Recently, the OSC published a document that listed its priorities in the current year, with a notable focus on cryptocurrencies. The commission said that its objective is to ensure consumer protection while at the same time enable capital formation and innovation to continue without disruption.
However, according to the OSC, the ICOs or initial coin offerings particularly present significant issues related to investor protection. However, the stance of the province towards ICOs is not exactly hostile (the OSC had approved the sale of TokenFunder in October).
The primary requirement for all crypto trading platforms to remember is that if an exchange runs its business within Canada’s jurisdiction, it should apply to the securities regulatory authority in that jurisdiction for legal recognition or for being exempted from such recognition.
Increasing Global Crypto Regulation
The Securities and Exchange Commission (SEC) in the US has launched investigations into several cryptocurrency exchanges and ICOs and has even cracked down on some of them. The SEC in February charged BitFunder, a former exchange, with fraud for illegally operating as a securities exchange without registration.
The regulator said that any platform that is engaged in the activities of a national securities exchange is required to register, irrespective of whether such activities involve coins, tokens or other digital assets. The US regulator has announced that will continue to proactively focus on these platforms in order to ensure securities law compliance and protect the interest of investors.
Just last week, Australia has also released a new set of regulations for crypto exchanges that require these platforms to complete registration and comply with the regulations related to anti-money laundering. Failure to comply with the regulations would result in civil and criminal consequences.