Crypto Trading Platforms: Canada Tightens Regulations

Canada breathed a sigh of relief when its regulatory body, The Canadian Securities Administrators (CSA), prevented FTX from entering its country in June 2022. It’s unclear what issues the FTX collapse would have caused had it been allowed to operate. Still, its demise is ushering in new protections for Canadian investors and crypto trading platforms operating inside its borders.

In December 2022, Canada increased regulations and took other preventative measures to protect cryptocurrency investors and platforms in response to the FTX bankruptcy.

These new rules apply to all local and foreign crypto trading platforms operating inside Canada. Some of the updated regulations require crypto exchange services providers to segregate custody assets from the platform’s proprietary business, and they ban crypto leverage and margin trading.

The CSA) warned that these regulations are only protection measures and that crypto assets and related financial products are high-risk investments that investors should consider using platforms registered with CSA members.

Kelly Massad, CEO of Mainstay Digital, is pleased with Canada’s response.

Kelly’s Thoughts

“I think that a lot of people are gonna be pleased with the fact that Canada has just prohibited cryptocurrency platforms from engaging in margin and leverage trading. This entire industry has needed that for quite some time now, and I think that it will encourage players that are a little bit more responsible to engage in trading cryptocurrencies now that one country has prohibited them from, doing so. Anytime that you get a situation where you can leverage trade 10 to a hundred x of your money on an exchange that’s pretty much a good indication of a bubble occurring.

I think that this comes at a very welcome time for some of the folks that were hit hard by the FTX fiasco. And I think that it will encourage more institutions to get involved from here on out. Now in regard to the segregation of assets on crypto as it pertains to exchange platforms, I think that is also a good thing that has been needing to occur.

These exchanges have been engaging in fractional reserve banking and as we have come to find out, that doesn’t even work with the government on your side. The fact that they’re nipping it in the bud right now is, I think, is welcome for a lot of people in the cryptocurrency space.

And whether that’s a slippery slope to continue on after this knock this out, that’s yet to be seen. But we should find out pretty soon. I for once am glad that the government is stepping up and, issuing some guidance around this. Not all bad, but we’ll see what happens.”