Industry participants have been invited to comment on the proposed regulations.
Cryptocurrency community members are reportedly working with regulators in Canada to create regulations for the industry, according to a report from Bitcoin Magazine.
Together with the Investment Industry Regulatory Organization of Canada (IIROC), the Canadian Securities Administrators (CSA)published a discussion paper last week with a “New Proposed Platform Framework.” The framework will tailor existing regulations to deal with the particular risks and challenges associated with cryptocurrency exchanges.
The paper also invites cryptocurrency and fintech companies as well as investors and stakeholders to comment on 22 questions. The goal is to gain insight as to which regulations would be the most befitting of the cryptocurrency industry. Responders have until May to send in their input.
Can Pre-Existing Regulations Be Used Effectively?
Most of the questions seem to focus on how to define what constitutes a cryptocurrency exchange, and how far the government should go in its attempts to enforce pre-existing regulatory models onto this new industry.
However, it’s clear that Canadian regulators are starting from the ground up in terms of their understanding of how the crypto industry should be regulated. There are still many regulatory “holes” that will need to be filled; several experts have pointed out the unclear relationship between cryptocurrency and existing securities laws in particular.
“Non-security tokens trading on Canadian exchanges may be derivatives and still subject to regulation,” commented Matt Burgoyne, a Calgary-based lawyer, on Twitter. Burgoyne also added that “there is a lot to unpack in the new CSA consultation paper on cryptocurrency exchanges. Exchanges must consider whether their interactions with users create a derivative contract or futures contract.”
Evan Thomas, a lawyer who headed a legal team at Osler, Hoskin, & Thomas that summarized the paper, told Bitcoin Magazine that one of the major issues with the paper “is that it is not clear as a legal matter that Canadian securities regulators have jurisdiction to regulate platforms for trading bitcoin and other crypto-assets that are not securities.”
“To ensure that the CSA does not exceed its jurisdiction over the cryptoasset industry, we are hopeful that Platform regulation will provide further clarity regarding types of cryptoassets and related services that are not subject to securities regulation, such as tokens that are not investment contracts or derivatives and non-custodial cryptocurrency wallets.”
QuadrigaCX May Have Spurred the Canadian Government into Action
The Canadian government has conducted two discussion rounds for the cryptocurrency industry before, in 2014 and 2018. This latest discussion paper comes several months after Canadian cryptocurrency exchange QuadrigaCX left its users without access to their funds following the sudden death of its CEO. By some estimates, as much as $150 million has been locked inside the exchange, perhaps forever.
The fact that the exchange was essentially totally unregulated has left devastated users without many options for legal recourse. As such, the cryptocurrency community is putting increasing amounts of pressure on the Canadian government to form regulations that could–at the very least–prevent something similar from happening in the future.