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The Canadian cryptocurrency market has experienced significant developments in recent years, with regulatory updates and high-profile exits by major exchanges like dYdX and Binance. The evolving landscape has led to a complex environment for both users and exchanges, with ongoing efforts to ensure compliance and protect investors. In this blog, we look into the current state of the Canadian crypto market, the role of regulatory bodies, and the implications for users and exchanges.
Regulatory Updates: Stricter Rules and Increased Compliance Requirements
The Canadian Securities Administrators (CSA) brought in new regulations that will increase the registration requirements for crypto exchanges operating in the country. The changes are introduced in response to a series of insolvencies among crypto asset trading platforms (CTPs) in 2022, to strengthen investor protections. The updated regulations focus on several key areas, including segregation of assets, leverage, determination of capital, and transparency.
A critical aspect of the new regulations is the prohibition on allowing Canadian clients to enter into contracts involving any crypto asset that can be classified as a security or a derivative. This rule has had a significant impact on crypto exchanges operating in Canada, causing some to exit the market.
Major Exchanges Exit: dYdX and Binance
Recent regulatory changes have forced major exchanges like dYdX and Binance to withdraw from the Canadian market. dYdX announced its exit in April 2023, citing regulatory issues as the primary reason. The exchange suspended onboarding new Canadian users and transitioned existing users to a “close-only model,” allowing them to withdraw funds but not engage in further transactions.
Similarly, Binance (more than 120 million registered users with a $38 billion daily trading volume) experienced disputes with the Ontario Securities Commission (OSC) starting in June 2021, leading to the exchange’s withdrawal from the province. While Binance initially gave mixed signals regarding its compliance with the OSC, it eventually ceased operations in Ontario and agreed to provide fee waivers and reimbursements to affected users.
Other Crypto Exchanges’ Plans
Coinbase is reportedly in discussions with Canadian regulators to obtain the appropriate licenses to continue operating in the country. Elliott Suthers, Coinbase’s Communications Director, stated, “We remain as committed as ever to the Canadian market as a core component of our international road map.” This move showcases Coinbase’s dedication to compliance and the Canadian market.
Other exchanges are also considering the decisions about their future in the country. Crypto.com(user base of more than 50 million and insurance coverage of over $750 million) is planning to remain in Canada, while Blockchain.com has confirmed its departure. Deribit has also informed customers that it is leaving. OKEx has already announced its departure earlier this month, and Kraken (9 million registered users across 190 countries) is expected to make an announcement soon.
Implications for Crypto Investors of Canada and Exchanges
The changing regulatory landscape in Canada has significant implications for both users and exchanges operating in the country. It might become challenging for users to access certain services and platforms, leading to decreased options and potentially higher costs. Exchanges, on the other hand, have to face increased scrutiny and regulatory hurdles that could impact their operations and profitability.
However, on the bright side, the evolving regulations may also present opportunities for compliant exchanges to gain market share and demonstrate their commitment to protecting investors. For users, the stricter rules could increase confidence in the market, as they can trust that exchanges are operating under a more robust regulatory framework.
Conclusion
The Canadian cryptocurrency market is in a state of flux, with evolving regulations and high-profile exits by major exchanges. The opportunity cost for Canada can be estimated in the range of billions with these major exchanges exiting, along with loss of jobs and a decrease in the number of exchanges for crypto investors.
While these changes present challenges for both users and exchanges, they also offer an opportunity to create a more secure and compliant market. By navigating this changing landscape, compliant exchanges can seize the opportunity to differentiate themselves and build trust with Canadian users. Meanwhile, users can benefit from a more transparent and secure market, ensuring their investments are protected.
