Regulators have never been more intent on cracking down on the cryptocurrency business than they are right now.
The significant regulatory offensive is particularly evident in North America. The Securities and Exchange Commission in the US has warned that it will sue numerous participants. Even Coinbase, the most well-known crypto exchange in the United States, is not safe from the regulator’s wrath.
The site received a “Wells Notice” from the SEC in March, indicating that the commission may bring legal action against Coinbase for allegedly breaking federal securities rules.
The two sides’ disagreement centers on whether cryptocurrencies are recognized as legal tender. The SEC has stated that, with the exception of bitcoin, the majority of cryptocurrencies and goods associated to them are securities, which would give the regulator significant control over the sector.
The regulator defines a security as an investment in a shared venture with a reasonable expectation of profit from others’ efforts.
Investors Are Not Allowed To Purchase Stablecoins in Canada
The SEC cites the Howey Test, a Supreme Court decision from 1946, as the definition of an investment contract and the criteria under which it is subject to U.S. securities laws. If money is invested with the hope of making money, an investment contract occurs.
Until recently, tokens, sometimes known as coins, were not thought of as securities. This indicates that they are exempt from tight regulatory oversight and are not bound by the same standards of financial transparency and disclosure, such as those that apply to, say, business shares. Token listing requirements are also less stringent than those for securities.
The SEC’s strategy, which claims that its goal and concern is to safeguard investors and the public, is rejected by Coinbase and other crypto participants. The Canadian government also justifies tightening cryptocurrency regulation by claiming that doing so will protect retail investors from fraud.
Ottawa issued a warning to crypto industry participants in February that they would need to follow “enhanced investor protection commitments” in order to do business there. While waiting for the license to be issued, these obligations are made through pre-registration with the authorities.
The enormous dangers involved with trading crypto assets, especially on unregistered platforms situated outside of Canada, are highlighted by recent insolvencies involving many crypto asset trading platforms. At the time, Stan Magidson, chief executive of the Alberta Securities Commission and chairman of the Canadian Securities Administrators, provided an explanation.
The pre-registration includes stricter requirements for the custody and segregation of cryptocurrency assets held on behalf of Canadian clients as well as a ban on providing any Canadian client with margin, credit, or other kinds of leverage.
Additionally, cryptocurrency exchanges are requested to prohibit customers from buying or depositing stablecoins and proprietary tokens without the CSA’s prior written approval. They have 30 days from the date the formal notice was published to regularize their condition.
Binance Departs Canada Due to New Regulations
One of the major players in the cryptocurrency business has just left the nation as a result of these onerous regulations.
The biggest exchange for bitcoin and other cryptocurrencies, Binance, is leaving the Canadian market. Changpeng Zhao (aka CZ), the platform’s Canadian founder and CEO, claims the new laws are to blame for his decision to leave the nation.
Unfortunately, today we must inform you that Binance will be proactively leaving the Canadian market, following other well-known cryptocurrency companies, Binance announced on May 12. They would want to express their gratitude to the regulators who cooperated with them to meet the needs of Canadian users.
It continued: Although only a minor market, Canada was important to them because it was the country where their founder was born. For the remainder of the Canadian blockchain industry, they had great expectations.
Unfortunately, Binance can no longer compete in the Canada market at this time due to new instructions regarding stablecoins and investor limits given to cryptocurrency exchanges. They delayed making this choice as long as they could so that they might look into other, fair protections offered to Canadian users, but it is now clear that there are none.
In the future, Binance does not rule out going back to the Canadian market.
Despite their disagreement with the new guidance, they intend to keep communicating with Canadian regulators in order to develop a thorough, intelligent regulatory framework, according to the platform.
They are optimistic that they will eventually re-enter the market once Canadian users are once more allowed to freely access a wider variety of digital assets.
The company promised to send instructions to its Canadian customers on how the choice will impact their accounts.
