OSC takes aim at crypto platforms

By James Langton | March 29, 2021 | Last updated on March 29, 2021
2 min read

Crypto-trading platforms have been given a three-week warning from the Ontario Securities Commission (OSC): inform regulators of their plans to comply with securities law, or face regulatory action.

The OSC’s shot across the bow of firms in the sector comes on the heels of new guidance from the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC), which generally calls on firms engaged in retail trading of cryptoassets to register as a dealer and join IIROC.

In the wake of the new CSA-IIROC guidance, the OSC is demanding that crypto-trading platforms contact the regulator by April 19 to discuss their plans for compliance. “If a platform currently trading in derivatives or securities in Ontario does not do so by this date, steps will be taken to enforce applicable requirements under securities law,” the OSC said in a release.

The OSC reported that it has seen a “large increase” in the number of platforms offering crypto trading in Ontario. Platforms that aren’t registered with regulators pose “significant risks to investors because investors’ assets may not be adequately safeguarded, and internal controls to manage the risks of the business may be lacking or non-existent,” it said.

“Unregistered cryptoasset trading platforms expose Ontario investors to significant risks, including potential loss, theft and misuse of their assets. The recent explosion of unregistered platforms has magnified these risks,” said Grant Vingoe, chair and CEO of the OSC, in a statement.

At the same time, the OSC said that it’s also concerned about crypto-trading platforms that are seeking to go public, either through back-door listings (such as a reverse takeover, or a capital pool company transaction), or via an initial public offering (IPO).

“There are potential public interest concerns with a platform that is required to be registered, but that is not, becoming a reporting issuer,” it said. Platforms that are considering a public listing must also contact the regulator about those plans.

The OSC indicated that its demand for compliance applies to any platform that allows access by investors in Ontario, even if the platform itself is located outside the province.

“Regulatory oversight serves a critical role in investor protection, and we expect platforms to act swiftly to bring themselves into compliance with Ontario securities law,” Vingoe said.

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James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.