Province of Ontario examining cryptocoin trading platforms

Posted Apr 9, 2018 by Ken Hanly
The Ontario Securities Commission (OSC) is examining the activities cryptocurrency trading platforms that are operating in the province.
Ontario Legislature
Ontario Legislature
OSC claims that cryptocurrencies may qualify as securities
An OSC spokesperson, Kristen Rose reported that the OSC had received a number of complaints about platforms selling cryptocurrencies. She said that the cryptocoins could qualify as securities:"These platforms, and any businesses that allow coins/tokens that are securities to trade on them, may be offside securities laws."
The OSC also noted that any platform offering cryptocoin trading had to determine whether it was a marketplace. Marketplaces must comply with rules governing exchanges or alternative trading systems.
Ontario law on security exchanges
Security exchanges in Ontario must apply to the OSC for recognition. The applications ask firms to describe their business, including corporate governance, operations, access requirements as well as fees and financial viability.
None of the platforms that the OSC is examining have been recognized as exchanges. None have been exempted from regulation either.
The examination is not a full investigation. At the present stage the OSC is simply gathering information about the activities of the platforms. However, the OSC in a recent document for this year said that it would focus on cryptocurrencies. The OSC said that its aims were to provide consumer protection, while at the same time allowing innovation as well letting capital formation to go ahead without disruption.
OSC claims that Initial Coin Offerings ICO's in particular present investor protection issues. However, the OSC is not always hostile to ICOs. Last October it allowed a TokenFunder sale. ICOs are a way by which startups raise capital. Many worry that without regulation some ICO's could be financial scams.
The exchanges and ICO's are operating in grey areas as regulators have yet to define clearly which security laws and regulations apply to the new offerings.
Other jurisdictions cracking down on cryptocurrency exchanges
In the United States the Securities and Exchange Commission (SEC) has been investigating a number of cryptocoin exchanges and ICOs.
In February this year the SEC charged the former exchange BitFunder with fraud for operating without a licence when it was a securities exchange. The SEC said that any platform that engaged in the activities of a national security exchange must register and this included digital assets, tokens, or coins.
The SEC said at the time, that it would continue to focus on these types of platforms to ensure compliance with securities laws and protect investors.
Australia earlier this week released new regulations that will require all exchange platforms to register and comply with anti-money laundering regulations. If they do not they will face criminal offense and civil penalty charges.