OSC working to ensure crypto asset trading platforms comply with securities law

TORONTO – The Ontario Securities Commission (OSC) is notifying crypto asset trading platforms that currently offer trading in derivatives or securities to persons or companies located in Ontario, that they must bring their operations into compliance with Ontario securities law or face potential regulatory action. 

Platforms must contact OSC staff by April 19, 2021, to discuss how to bring their operations as a dealer or marketplace into 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. Platforms located outside of Ontario that allow Ontarians access are regarded as operating in Ontario for the purposes of securities regulation. 

"Unregistered crypto asset 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 at the OSC. "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.”

The OSC has seen a large increase in the number of platforms currently offering crypto assets or crypto contracts to persons or companies located in Ontario. Recent market activity and investor interest in crypto trading platforms has only added to the number of platforms operating. Platforms that are not registered with securities regulators present 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.

Platforms must contact OSC staff at [email protected] to start compliance discussions by April 19, 2021.

OSC expectations are consistent with the regulatory framework issued by the Canadian Securities Administrators (CSA) earlier today. As part of this framework, platforms currently facilitating trading in security tokens or instruments or contracts involving crypto assets in Canada, are required to register as an investment dealer and become a member of the Investment Industry Regulatory Organization of Canada (IIROC). An interim registration approach may be available, as described in the framework.

The OSC is also aware of platforms seeking to become reporting issuers through initial public offerings or through reverse take-overs, changes of business, Capital Pool Company qualifying transactions or similar transactions. There are potential public interest concerns with a platform that is required to be registered, but that is not, becoming a reporting issuer. Platforms must contact OSC staff at [email protected] if they intend to become reporting issuers through an initial public offering or other transaction.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.

 

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