Canada issues new guidance for digital currency exchange regulation

Authorities in Canada have published new updated guidance for digital currency exchanges operating in the country, in a move that could lead to the introduction of mandatory licensing requirements.

Two Canadian regulatory agencies published the proposals which target crypto-asset trading platforms, or CTPs, The Globe and Mail reported. The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada published the proposals in order to delineate where existing securities legislation applies to the activities of digital currency businesses.

As per the proposals, new licensing requirements would be introduced for digital currency platforms that retain control over customer funds. The rules will not extend to non-custodial exchanges, unless they also offer margin trading.

“Dealer Platforms may not offer margin or leverage for Security Tokens unless they are registered as an investment dealer and are IIROC members. Similarly, Dealer Platforms that trade Crypto Contracts are expected to be registered in an appropriate dealer category, and where they trade or solicit trades for retail investors that are individuals, they will generally be expected to be registered as investment dealers and be IIROC members.”

Exchanges that qualify under the definition of a marketplace are allowed exemptions on application to their provincial regulator, which allows exemption from reporting requirements and clearing obligations.

The new rules would also impose a requirement for overseas digital currency exchanges to be licensed in Canada before being able to legitimately trade there. While the regulator has yet to initiate any enforcement action under the regulations, it intends to reach out to platforms on an individual basis to discuss their business model and any new requirements under the laws.

The measures come at a time of increasing regulation worldwide for digital currency exchanges and other companies. If introduced, it is hoped the new measures will help better regulate the sector, in a way that fosters growth and innovation in the digital currency sector.

See also: CoinGeek Live panel, Digital Currency & Global Compliance: Tools & Tips for Exchanges, Wallets & Other Service Providers