Canada Outlaws Crypto Leverage And Requires Exchanges To Separate User Funds
Canada cryptocurrency exchanges must separate user funds from operations cash and stop providing margin traders with leverage going ahead.
That is in accordance with new rules established by the Canadian Securities Administrators (CSA), a regional body that serves as a clearinghouse for securities regulators.
According to a statement released by the CSA on Monday, cryptocurrency trading platforms will also be obliged to hold the funds of Canadian customers with a “appropriate” licensed custodian. Custodians are deemed qualified if they are subject to regulation in Canada, the US, or another comparable country.
“Following recent events in the crypto market, the CSA is strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada,” the organization said.
All traders based in Canada will not be allowed to trade cryptocurrency on margin, including businesses and institutions. Similar action for retail investors is being considered in Singapore.
Sam Bankman-FTX Fried’s exchange started to fall apart and eventually filed for bankruptcy
John J. Ray, the newly appointed CEO of FTX, testified before Congress on Monday that FTX had combined user assets with its sibling trading company Alameda Research in an effort to increase its own revenue.
The CSA officials also issued a warning to cryptocurrency exchanges not to support any cryptocurrency that can be regarded as a security, which could include stablecoins, according to the regulators.
“The CSA is of the view that stablecoins, or stablecoin arrangements, may constitute securities and/or derivatives,” the group said. Crypto exchanges must have established policies and procedures to determine whether the digital assets they list are securities or derivatives.
It is unclear exactly when the new provisions will take effect, though platforms can expect to be contacted individually to discuss the changes. The CSA did not immediately respond to a request for comment.
Jacob Robinson, lawyer at Canadian law firm McCarthy Tétrault, tweeted that the new rules may have a large impact on local crypto exchanges moving forward.
“This categorization could lead to a major delisting of stables on Canadian exchanges,” Robinson said. “Closest to a definitive statement we’ve seen [regarding] stablecoins as securities/derivatives.”
The main financial regulator in Canada, the Ontario Securities Commission (OSC), openly forbade local crypto exchanges from dealing with the popular stablecoin tether in September. However, the OSC hasn’t made it clear if it considers USDT to be a security.
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