For the past few weeks, Canadian financial regulatory authorities have been considering regulating cryptocurrency exchanges in the country. The QuadrigaCX scandal seems to be yet another reason for the regulatory agencies to intervene in the “Wild West” they consider the cryptocurrency industry to be.
Canadian Authorities Propose Regulations
“We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.” – Joint CSA/ACVM – Consultation Paper 21-402
On March 15th, The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada(IIROC) released a paper with their plans of taming what they see as a “financial Wild West”. These regulatory agencies believe it is an issue that people may interact in the marketplace freely. Crypto markets remain largely unregulated and people can come and go as they please without consequences, regulations or consumer protection. As a result, they are evaluating potential “regulations and laws” for the crypto industry in order to avoid cases similar to QuadrigaCX.
“The emergence of digital and crypto assets continues to be a growing area of interest,” -Andrew J. Kriegler, CEO and president of IRROC.
Currently, cryptocurrency exchange companies are treated as tech startups by the Canadian government. None of these companies are officially recognized as an official stock exchange service or financial investment company. Regulatory agencies argue that due to the QuadrigaCX incident which left many crypto investors without the funds they had invested, this must change.
Some other proposals in their paper include mandating that the cryptocurrency industry develop custody solutions. A potential outcome of some of the policies in the paper being implemented could include a mandate that crypto exchange startups hold membership in The Investment Industry of Regulatory Organization of Canada.
The QuadrigaCX Effect
“To reduce the risks of potentially manipulative or deceptive activities, in the near term, we propose that Platforms not permit dark trading or short selling activities, or extend margin to their participants.” – Joint CSA/ACVM – Consultation Paper 21-402
If the Canadian government passes certain regulations outlined in the paper, short selling and margin trading will be forbidden. In short, crypto investors located in Canada will no longer be able to profit by applying short-selling techniques when their crypto assets are depreciating, or margin trading their crypto assets.
In the eyes of the Canadian government, cryptocurrencies have become a haven for scammers and people looking to dodge taxes. Unfortunate incidents, such as the QuadrigaCX scandal, are being used as the perfect excuse for Canadian regulatory agencies to increase their control over the world of decentralized coins.
Originally published on 71Republic