Submitted by nsscadmin on
A few more crypto trading platforms (CTP) that were active in Canada have recently shut down or decided to leave the jurisdiction. One of the reasons stated by several CTPs that have decided to leave the Canadian market is difficulty complying with securities law requirements. We’ve talked about some of these requirements in previous posts, but since these requirements continue to be highlighted by CTPs and media outlets, and often in a negative light, we’ve produced this post to share the Top 3 things a registered platform must do that an unregistered platform does not. These are what we consider to be three of the most important requirements designed to protect investors.
- Requirement to hold client’s crypto assets with a custodian that also meets securities law requirements
This requirement ensures that a CTP places all crypto assets in custody of a custodian that is independent from the platform. If you want to see what can happen when this independence is lacking, simply look at the Quadriga CX fraud where the operator of the platform not only had direct access to customer’s assets but also sold and traded them without their knowledge. This independent custody also allows for other protections such as insurance , audited financial statements for the custodian, and independent reviews of the custodian’s internal controls.
- Requirement to provide clear information to clients about the risks of using the platform and the risks of the individual crypto assets that are available on the platform
Something you may often see on unregistered and fraudulent CTPs is guarantees of profits and exorbitant returns. What you’ll seldom see is any warning and information about risk of using the platform or that investing in cryptoassets can be extremely volatile and risky. A registered CTP must provide clear and honest information that outlines all the risk factors of using their platform and investing in the crypto assets available.
- Requirement to promptly deliver crypto assets held by a client on the platform to a wallet address specified by the client, subject anti-fraud controls
Do you know what fraudulent CTPs do when you request assets to be moved to another wallet or platform or to be withdrawn as cash? It’s usually one of three things.
1. They’ll require you to pay a tax or fees to get your assets moved or funds withdrawn.
2. They move your assets to another wallet or platform you do not have access to.
3. They do absolutely nothing, keep your crypto assets and lock you out of the platform.
A registered CTP must promptly deliver your assets to whatever wallet address you provide them. Not only must this transfer be done promptly, but it also must be done with anti-fraud controls in place.
We are not saying that all CTPs that operate in Canada without registration are fraudulent and engage in theft. But a lot of them are. You can find examples of dozens of them by reviewing our Investor Alerts and Cautions lists. Any CTP that appears on this list has engaged in fraudulent activity and has stolen money or assets from Nova Scotia investors. The best way to avoid this is by using a CTP that is registered with securities regulators. You can find a list of these registered CTPs here. This list is continually updated when new CTPs become registered