Canada Reportedly Bans Cryptocurrency Leverage

Canada-based securities regulators are enhancing their endeavors to crack down on the entities operating across the country to provide services related to crypto-asset exchange. In addition to this, stablecoins may also face a threat simultaneously. According to the reports, exchange entities working in Canada require making a distinction between the funds of the clients as well as the operational cash.

Canadian Authorities Prohibit Crypto Leverage, Directing Exchanges to Separate Customer Funds

Along with this, there is another obligation for them to put a stop to any leverage offering for the margin traders in the future. These are the things that are mentioned in the latest guidelines established by the Canadian Securities Administration (CSA) which is an organization specified for the regulation of the securities within the region.

Another thing to be implemented over the crypto trading companies will be to keep the assets of the consumers living in Canada with the use of adequate qualified custodians, as stated by the CSA in a statement on Monday. To be considered qualified, the custodians should prove that they are regulated within the jurisdiction of the country, the United States, or such other jurisdiction.

The CSA disclosed that after the drastic events that took place recently within the crypto market, the organization is fortifying its perspective toward the observation of the crypto trading companies by spreading the present needs for the firms providing their services in Canada.

On the other hand, there would be implemented a straight ban on the margin crypto trading, taking into account the organizational consumers and institutions. Apart from that, Singapore is also moving toward a similar approach to be put on the retail investors. The exclusive restrictions of Canada have been witnessed at a time when a month has elapsed after the collapse of FTX that eventually ended in the bankruptcy of the crypto exchange.

On Monday, John J. Ray (the new CEO of FTX) testified in front of Congress that the funds of the consumers were comingled by the crypto exchange in collaboration with its sister firm called Alameda Research. As per the executive, the purpose behind this move was to make extra revenue. The CSA regulators additionally cautioned the crypto platforms saying that they should not provide any facility related to crypto assets that can be categorized as securities.

The category of securities could also include stablecoins, according to the regulators. In the words of the CSA, stablecoin arrangements or stablecoins may comprise derivatives and/or securities. In this respect, crypto exchanges need to develop procedures and policies to determine if the digital assets listed by them are derivatives or securities.

Latest Rules May Ignite a Huge Delisting

At the moment, the precise time for the implementation of these provisions is unknown although CSA may individually discuss the modifications with the companies. A lawyer at McCarthy Tétrault (a law firm operating in Canada), Jacob Robinson, posted a tweet noting that the latest regulations may put a significant impact on native crypto exchanges in the future.

In his words, a huge delisting would possibly take place on the exchanges within the country. In September 2021, the Ontario Securities Commission (OSC) – which is also known as the biggest financial regulator in Canada – strictly prohibited the native crypto exchanges from dealing with Tether (the top stablecoin) despite offering no information on if it is considered a security.

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