According to new guidance published by the Canadian Securities Administrators (CSA), any digital exchange serving Canadians will have to abide by the country’s securities laws. This includes onshore and offshore exchanges alike.
While at first, it may seem that this would only include businesses offering assets that Canadian regulator considers securities, the notice states that the same securities laws will apply to platforms that offer purchase and sale of crypto assets, as well.
The reason for this is that crypto users’ contractual rights to the crypto asset may constitute a derivative. In other words, even if cryptos technically fall under the category of commodities, the platforms offering them will be under securities laws.
According to the guidelines, it appears that most — if not all — centralized cryptocurrency exchanges will have to follow Canada’s security laws. So far, it appears that only non-custodial exchanges might be excluded since they do not manage their customers’ funds.
Louis Morisset, Autorité des marchés financiers’ CEO and also a CSA Chair, stated that the landscape evolution requires the regulator to bring regulatory clarification. That way, the country would be able to better support businesses aiming to offer innovative services, products, and applications.
So far, the regulator is still examining responses and comments received during the consultation that was launched back in 2019. However, publishing the notice early provided crypto businesses with enough time to determine whether their activities make them subject to securities laws.
However, the notice had quite a strong impact, as many of the listed cryptocurrencies offer dividends or voting rights to their holders, which may label them securities. For now, the exchanges were advised to seek out legal counsel and to determine whether or not the securities laws will affect them, as the agency does plan to take action against them, whether they are in Canada or abroad.