• Canada is tightening its crypto trading regulations to prevent another FTX financial collapse.
• The Ontario Securities Commission and other securities regulators are monitoring unregulated digital currency exchanges in the country.
• The rules require that user funds cannot be mixed with the exchange’s, margin trading must not be offered, and no debt can be involved.
Preventing Another Financial Collapse
Canada is attempting to prevent a similar situation from occurring again by implementing new rules for crypto trading within its borders. The Ontario Securities Commission and other securities regulators are closely monitoring any unregulated digital currency exchanges that do not meet specific financial regulations. If they do not provide a plan of action to adhere to these regulations within 30 days, they will be forced to end their services in Canada.
Avoiding Loopholes
The established rules state that user funds must remain separated from the exchange’s funds, no margin trading should be allowed, and no debt should be involved. This is due to allegations that Sam Bankman-Fried – the founder of FTX – used customer money to pay off loans for his company Alameda Research as well as purchase luxury Bahamian real estate.
FTX Disgrace
The FTX disaster serves as an example of why Canadian authorities have decided to enforce stricter regulations on crypto trading platforms. Initially considered one of the world’s top five digital currency exchanges when it was founded in 2019, FTX quickly collapsed due to its CEO’s mismanagement of customer funds.
Tremendous Risks
Stan Magidson – CEO of the Alberta Securities Commission and chair of the Canadian Securities Administrators – commented on the risks associated with trading crypto assets on unregistered platforms outside of Canada: “Recent insolvencies involving several crypto asset trading platforms highlight the tremendous risks associated with trading crypto assets“.
Protection for Investors
By enforcing tighter rules for cryptocurrency exchanges, Canada hopes to protect investors from similar scenarios like what occurred with FTX and ensure nothing like it ever happens within its borders again.