According to regulatory documents, the Ontario Securities Commission has prohibited a pair of crypto trading platforms from trading Tether.
Wealthsimple and Coinberry, both based in Toronto, are the first of their kind to be accepted into “an interim, time-limited registration framework that would allow crypto-asset platforms to operate within a regulated environment, with regulatory requirements tailored to the crypto asset platform’s operations,” according to the Canadian Securities Administrators.
However, it appears that these permissions confine these sites to a small handful of accepted cryptocurrencies, namely bitcoin, ether, bitcoin cash, and litecoin. Tether is the only digital asset included in the “Prohibited Crypto Assets” appendix.
Both permission forms state that “the Filer will not trade Crypto Contracts based on crypto assets, digital or virtual currencies, or digital or virtual tokens indicated in Appendix C to this Decision.”
Neither paper provides a detailed explanation for why the platforms in question are prohibited from trading Tether. Despite this, the OSC’s filings state that its judgment “should not be considered as precedent for other filers.”
The OSC’s representative wrote to The Block, saying:
“We do not currently plan to introduce new rules specifically applicable to platforms, as platforms are already subject to existing requirements under securities legislation in Canada.
Rather, where appropriate, existing requirements of securities legislation may be tailored through terms and conditions on the registration or recognition of CTPs [cryptocurrency trading platforms] and through discretionary exemptive relief with appropriate conditions. “
“With respect to Tether and Bitfinex, the report by the New York AG likely did not provide comfort to the securities regulators and in the eyes of a government regulator, is likely to be viewed as high-risk,” Christine Duhaime, a Canadian lawyer who specializes in financial technologies, told The Block.
“I anticipate that some digital currency organizations won’t be allowed to operate in mature regulatory countries unless they bind themselves to a country with transparency and where digital currency holders have rights they can use if things go wrong,” Duhaime stated.
Tether, the company behind USDT, resolved a lawsuit with the New York Attorney General in February, barring the stablecoin operator from doing business in the state and requiring it to provide more information about its activities. Despite a continual extension of disclosures, Tether is said to be facing significant regulatory issues.
A broader regulatory framework
Canada’s securities regulators, particularly the Ontario Securities Commission, have been busy enforcing a new principle that states that exchanges holding crypto in custody are de facto offering securities, even if the cryptocurrencies involved are not securities.
Risk disclosures that are more in line with securities trading are required under the “crypto contracts,” i.e. the agreement between platform and user.
Before it began reviewing exchanges more closely, the OSC designated Wealthsimple as the sole completely registered crypto trading platform.
Coinberry and wealthsimple
Coinberry was also the only cryptocurrency exchange to file a report with the Ontario Securities Commission before the April deadline, following which the OSC initiated a series of legal procedures to force other cryptocurrency exchanges out. Coinberry is a traditional cryptocurrency exchange that accepts withdrawals.
Wealthsimple is a cryptocurrency trading platform that allows users to obtain price exposure to the cryptocurrency market.