Canadian securities authority publishes regulations for crypto exchanges

The Canadian Securities Administration (CSA), the countries equivalent of the US Securities Exchange Commission (SEC), has published a guideline for crypto exchanges. The authority released the document in conjunction with the Investment Industry Regulatory Organization of Canada (IIROC) on September 23. The rules revolve around the requirements that crypto-trading platforms need to meet regarding advertising, marketing, and social media use.

According to the authorities, some crypto exchanges in the country have been leveraging advertising and marketing strategies that go against the requirements of securities legislation. The regulators also pointed out that crypto-trading platforms have been using marketing methods that disregard public interest. 

Specifying the organizations that will come under the purview of the new regulations, the agencies said crypto-trading platforms are firms that trade securities and/or derivatives. The policies apply to registered crypto exchanges under securities laws, new firms seeking registration, and registrants that want to launch a crypto-trading platform as a new business unit. 

Focusing on investor protection

Giving examples of marketing campaigns that some crypto-trading platforms have been using, CAS and IIROC noted that,

“We have recently noted some CTPs using advertising or marketing strategies that include contests, promotions, bonuses and time-limits to encourage investors to engage in trading and to act quickly for fear of missing out on an investment opportunity or a reward.”

The regulators gave an example of a crypto-trading platform running a promotion that involves a bonus scheme that may offer a financial reward or a bonus interest for trading a specific crypto asset. The crypto-trading platform then limits the campaign to the first 500 investors that trade the coin within 24 hours.

Per the regulators, such campaigns may inappropriately encourage investors to take on risks they would avoid. As such, the authorities urged crypto exchanges to refrain from facilitating or engaging in activities that bring the nascent sector ill reputation.

To address these malicious advertising approaches, the notice offers guidance on using statements and materials that might be false or misleading while advertising, running promotions that encourage excessive trading, and general securities legislation compliance. The policies also instruct crypto-trading platforms on how to use social media platforms to promote products. 

Regulators continue trying to rein in the crypto space

This news comes after SEC Chair Gary Gensler said he does not think thousands of cryptocurrencies will maintain their viability if they keep breaching laws. To this end, he suggested that it is vital to set up an investor protection regime to shield them against such coins. Before this, Gensler went on an interview to say the SEC has no objection to people taking risks. However, the agency seeks to offer some elemental protection against fraud and speculation.

With global financial watchdogs clamping down on the crypto space to help mitigate fraud, the burgeoning asset class remains a ripe target for malicious actors. Yesterday, scammers attacked Bitcoin.org, to run a fraudulent promotion. The scammers walked away with over $17,700 after promising to double any amount that the website’s visitors sent to their address. The website’s owner shut it down for the better of yesterday to prevent more people from falling victim to the scam. 

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