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Crypto-asset traders may be subject to securities legislation

By The IJ Staff | January 16 2020 01:33PM

The Canadian Securities Administrators (CSA) published Staff Notice 21-327 on Jan. 16, entitled Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets. In it, regulators describe situations where securities legislation will and will not apply when platforms facilitate the buying and selling of crypto assets.

"The evolving landscape of the industry prompts us to clarify our regulatory framework so as to better support fintech businesses seeking to offer innovative products, services and applications in Canada," says Louis Morisset, CSA Chair and President and CEO of the Autorité des marchés financiers. "As we continue to consider the comments and responses to the consultation we launched last year, the staff notice published today will help platform operators to determine whether their activities are subject to securities legislation."

The CSA says securities legislation may apply to platforms that facilitate the buying and selling of crypto assets because the user’s contractual right to the crypto asset itself may constitute a derivative, a security or both. The notice also provides a detailed example of a situation where securities legislation does not apply.

The staff notice was not immediately available on regulator’s websites.

“The CSA and the Investment Industry Regulatory Organization of Canada (IIROC) continue to review the comments and responses to Joint CSA/IIROC Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms,” the CSA said in a statement released Jan. 16. “We anticipate publishing a summary of comments and responses along with guidance on the regulatory framework applicable to crypto-asset trading platforms that are subject to securities legislation later this year.”

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