Historically speaking, cryptocurrency platforms have been noticeably unhappy with the very idea of regulation. They wanted to make their own rules to the extent possible and they recoiled in terror anytime a Canadian governmental body or other oversight agency even suggested making rules about cryptocurrency transactions. For a long time, that is just the way it was.
However, something has changed recently. The largest and most regulatory-hostile cryptocurrency platforms have been adopting regulations on their own, including many rules and regulations that are far stricter than those ever proposed by the Canadian government. For example, several platforms have put investor protection systems and measures in place, while others have put in place huge compliance teams, to make them more investor-friendly.
One platform executive is on the record for taking action. While his company wasn’t obligated to put investor-friendly practices in place to satisfy securities regulators, he felt they had to do so to protect their most vulnerable clients from fraudulent act. He also claimed the changes were necessary if his company was to become a destination people can trust with their money.
What triggered this shift in the Canadian cryptocurrency sector?
All of this has changed almost overnight. As little as a few months ago, Canadian cryptocurrency investors had little to say about much of anything. For about a year, almost no crypto-trading platforms operated with the approval of Canadian securities regulators. However, Coinberry in August 2021 and Netcoins in October 2021 seemed to break the logjam and made moves in the direction of a regulatory model.
Before then, Canadians who wanted to invest in most cryptocurrencies, or use them to make purchases, had no option but to use one of the hundreds of unregistered platforms to break into that market. According to a press investigation, those who wanted to invest in crypto could have been handing over their savings to a company that may have been scamming them, and there was nothing in the law to stop it.
Suddenly, in March 2021, Canadian securities regulators announced their intent to crack down on the cryptocurrency industry. There are six registered cryptocurrency-trading platforms available in Canada, and Bitbuy, a Toronto-based company, recently became the first to operate under a regulated marketplace, which provides consumers who invest in crypto with higher standards. In other words, slowly but surely, the cryptocurrency sector in Canada, which always had a reputation for being either hostile or indifferent when it came to regulators and regulation, is now becoming more professional, overall. Many have credited its development and the level of maturity the Canadian crypto-trading platforms have developed in recent years. Others have credited the platforms themselves for deciding it might be better to be proactive.
What does the attitude change entail?
At a recent online event, a major executive with one cryptocurrency platform revealed many of the goings-on at his company, even before government regulators had announced the March crackdown last year. He admitted shock and surprise when he saw how quickly crypto trading had exploded. He said he felt that it would be wiser for his company to act quickly, at least more quickly than if they waited for the legislature to pass new laws requiring them to act.
Several cryptocurrency platform CEOs are on the record saying that getting registered as securities dealer has cost them a lot and required them to expand the size of their staff. In one case, the platform now has 90 employees, when they had just 15 at the beginning of last year. For the most part, the new staff is focused on finance, accounting, and compliance.
However, that seems to be just the beginning, since many of those CEOs are engaged in many other time-and-money-consuming activities, just to stay afloat. They claim to be increasing their level of insurance, making major improvements to their financial reporting practices, and also hiring licensed custodians to better care for and maintain their clients' crypto assets. These companies have also imposed suitability models. That is because, as regulators impose different rules on each platform, based on whether it fully assesses whether their clients’ investment activity is suitable for them and their needs.
So, what’s the bottom line?
While many CEOs of cryptocurrency platforms and related companies have decided they'd like to set a trend of crypto companies voluntarily taking greater care with their clients' investments, there are some experts who are a lot more skeptical. Some suggest that it's inevitable that the government will regulate the industry, to the point that crypto investors will soon refuse to invest with a platform or company that is unregistered and/or not following the wide variety of rules the government will inevitably pass into law. That some companies have decided the best way to deal with things is to get out in front will soon be irrelevant.That said, regulators do seem happier with the new attitude.
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About The Author: Emma Martin
Emma Martin writes about the curiosities of finance. Her obsession with cryptocurrency keeps her writing most days about the best exchanges and wallets, and the wild world of NFTs. Her favourite exchanges right now are Bitbuy, NDAX, and VirgoCX.
Emma also invests in the stock market using Wealthsimple Trade. Other than crypto, Emma spends her time with her dog Brutus and shopping online with her Mastercard® KOHO Prepaid Card.
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