Canadian crypto trading platforms (CTPs) are on the brink of a significant regulatory deadline to finalize their compliance with new mandates. The Canadian Investment Regulatory Organization (CIRO) and the Canadian Securities Administrators (CSA) have issued a reminder for CTPs to complete their transition to full investment dealer status and secure CIRO membership.
Since March 2021, CTPs have been operating under interim rules, allowing them to function as restricted dealers while working towards mandatory CIRO membership. Now, this temporary period is ending, and the CSA expects all CTPs to have thoroughly understood and begun adhering to the new regulations. Currently, there are 15 CTPs in Canada, including Coinsquare, which became the first to achieve CIRO membership in October 2022 after applying in November 2020.
The CSA began implementing pre-registration requirements for CTPs in August 2022, emphasizing customer protection. The regulations were further tightened in February 2023 in response to the instability in the crypto market, particularly concerning stablecoins. Some exchanges, such as Kraken and Gemini, quickly adapted to the new rules, while others, including OKX, dYdX, Paxos, ByBit, and Binance, chose to exit the Canadian market.
The CSA has also issued guidance for investment firms dealing with crypto and expanded on these rules earlier this year. With Bitcoin exchange-traded funds available in Canada since 2021, the country is creating a more defined framework for crypto trading.
As the deadline for CIRO membership approaches, Canadian CTPs are working diligently to ensure their operations meet the required legal standards. The CSA and CIRO have stressed the importance of moving from restricted dealer status to fully recognized investment dealers. This transition is crucial for CTPs to maintain their legal status in Canada’s financial market.
The regulatory bodies have noted that given the elapsed time since the initial interim period, CTPs should have thoroughly assessed and understood the requirements for registration as investment dealers and CIRO members. Although some platforms, like Coinsquare, have successfully transitioned, others have opted to leave the Canadian market instead of complying with the stringent regulations.
The CIRO and CSA’s rigorous approach aims to create a safer and more regulated environment for crypto investors in Canada. CTPs are now expected to submit comprehensive applications demonstrating their operational preparedness, financial stability, and compliance with CIRO’s standards. CIRO has also developed a Readiness questionnaire to assist platforms in assessing their readiness for membership.
This move follows a series of regulatory measures by Canadian authorities to strengthen the crypto market’s oversight, particularly after the collapse of several blockchain companies. The CIRO and CSA’s efforts are geared towards fostering a more secure and controlled space for crypto investments in Canada.
