By Michael Scott
Efforts to protect consumers and investors from the FTX-like collapse prompted action by Canadian authorities to prohibit crypto firms from offering margins. The directive aims to safeguard Canadian crypto investors in the awareness of multi-billion dollars of digital wealth trapped in the bankrupt FTX.
The Canadian Securities Administrators (CSA) reinforced its supervisory approach to crypto operators through a December 13 update that expanded the existing requirements. The update issued in collaboration with the provision and territorial regulators banned local and foreign crypto firms from leverage trading. It prohibits the providers of trading services from enticing Canadian clients with margin offerings.
Segregating Users’ Funds from Proprietary Business Assets
The expansion of the existing requirements crypto firms must satisfy is triggered by the need to spread contagion witnessed after the calamitous FTX collapse. Besides, the expanded requirements compel all providers of crypto exchange to run the proprietary business assets separately from the custody assets. The awareness necessitates the segregation that FTX allegedly depleted users’ funds by rerouting them to the embattled affiliate firm – Alameda Research.
The CSA statement clarified that crypto firms providing custody must secure registration from Canada-based financial regulators. Also, the update recognizes custodians regulated in the US as qualified alongside those hailing from jurisdictions whose supervisory regime is founded on fair business practices and compliance with financial regulation.
The CSA update echoed previous communication conveyed via the August 15 statement that all crypto traders should commit to operating registered businesses. In particular, CSA urged the unregistered platforms to pursue the pre-registration undertaking.
Update Reinforces CSA’s Response to FTX
The recent update reinforces the CSA communication promoted by FTX internet in acquiring the Canadian crypto firm Bitvo. FTX intended to leverage the Bitvo takeover as it pursued global expansion. The deal fell in following the dramatic FTX implosion. It prompted Bitvo to terminate the acquisition plans, saving it from freezing operations as witnessed by unfortunate firms acquired by Sam Bankman-Fried.
Bitvo chief executive Pamela Draper lauded the stringent conditions imposed by Canadian authorities, such as the Alberta Securities Commission. Draper considered the regulatory approval process critical to protecting the digital investment of Canadians from poorly governed crypto platforms.