FTX Aftermath: Canada Introduces Stringent Rules for Crypto Trading Platforms

The Canadian Securities Administrators (CSA) has spelled out a set of rules that must be abided by all platforms that offer crypto trading, in a bid to safeguard its residents from financial risks associated with crypto. The global crypto community is trying to overcome a major shake-up, in the aftermath of the downfall of the FTX crypto exchange last month. As part of these rules, Canada has imposed a ban on crypto exchanges offering ‘margin or leverage trading' to the country's residents.

In margin trading, users are allowed to borrow funds from an exchange and use it to make a trade. This allows the traders to invest more than they have in crypto assets, which may or may not entail profitable results.

Canada will soon issue a deadline for unregistered crypto companies to disclose their details and submit a pre-registration undertaking (PRU) to the financial regulator.

The companies will have to vouch that they are in compliance with Canada's laws. The CSA has further clarified that even international exchanges that are accessible by Canadians will also have to adhere by these rules as part of the securities regulation.

“Crypto trading platforms giving these undertakings agree to comply with expanded terms and conditions that will include, among other things, requirements to hold Canadian clients' assets with an appropriate custodian and segregate these assets from the platform's proprietary business, as well as a prohibition on offering margin or leverage for any Canadian client,” the official statement from the CSA read.

Crypto firms will have to choose custodians to store the assets of Canadian clients. The custodians will have to regulated by a financial regulator in Canada, US or similar jurisdictions.

“Following recent events in the crypto market, the CSA is strengthening its approach to oversight of crypto trading platforms by expanding existing requirements for platforms operating in Canada. Even with the adoption of these measures, crypto assets or financial products relating to crypto assets are high-risk investments. Canadian investors are urged to exercise caution and consider seeking advice from a registered investment advisor before investing in crypto,” the statement added.

Canada, at this point, is also closely examining the role of stablecoins in its market.

In a recent survey, Canada's Ontario Securities Commission said that 13 percent of Canadians currently hold digital assets such as cryptocurrency or non-fungible tokens (NFTs).