Canadian financial authorities are discussing the potential implementation of regulatory frameworks for cryptocurrency exchanges, according to an official consultation paper.
The consultation comes after the QuadrigaCX scandal that has seen $190 million worth of customers’ funds being locked up in cold wallets due to the sudden death of the exchange’s CEO Gerald Cotten.
The Canadian Securities Administrators (CSA) published the consultation paper to receive feedback from the Canadian fintech community on how to regulate digital asset exchanges.
“The emergence of digital and crypto assets continues to be a growing area of interest,” said Andrew J. Kriegler, CEO of Investment Industry Regulatory Organization of Canada on Thursday.
Kriegler added: “We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection.”
One of the solutions to safeguarding investors, as put forward by the regulators, is to apply securities laws wherever applicable.
Imposing securities laws on cryptocurrency exchanges would see the same laws apply as on traditional stock market exchanges, with audits and registration being required.
Cryptocurrency exchanges are viewed as being “hybrid” by nature by the Canadian regulators, which means that a “tailored” set of frameworks will potentially be deployed to limit the risks of exchanges and custody services.
In response to the QuadrigaCX scandal, the British Columbia Securities Commission (BCSC) said that it does not fall under its jurisdiction.
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