© Courtesy of TheStreetNever has the cryptocurrency industry been subjected to such harsh criticism from regulators as this year.
The significant regulatory push is particularly evident in North America. In the United States, the Securities and Exchange Commission has threatened legal action against several players. Even Coinbase ( COIN ) , the most popular cryptocurrency exchange in the US, isn't immune to the regulatory crusade.
In March, the SEC sent the platform a so-called Wells Notice, indicating that the regulator might sue Coinbase for violating federal securities laws.
The dispute between them revolves around the legal qualification of cryptocurrency. The Securities and Exchange Commission (SEC) noted that with the exception of Bitcoin, most cryptocurrencies and related products are securities, giving the regulator more leverage over the industry.
A stock, according to the agency, is "an investment of money in a normal business with a reasonable expectation of profit from the efforts of others."
Canada prohibits investors from buying stablecoins
The SEC refers to a 1946 Supreme Court decision, the Howie test, which describes what an investment contract is and what makes it subject to US securities law.
Tokens, also called coins, are not yet considered securities. This means that they avoid rigorous regulatory scrutiny and are not subject to the same rules of transparency and financial reporting as, say, a company's stock. The process for listing tokens is also less stringent than that for shares.
Coinbase, like other cryptocurrency players, rejects the approach of the SEC, which it says is its goal and concern to protect investors and the public. Protecting retail investors from fraud is also an argument for Canadian authorities to tighten cryptocurrency regulation.
In February, Ottawa warned cryptocurrency players that they must meet “enhanced investor protection obligations” to operate in the country. These obligations are accepted in the form of pre-registration with the authorities before obtaining the license.
“The recent bankruptcies involving several cryptocurrency trading platforms highlight the enormous risks associated with cryptocurrency trading, particularly when conducted on unincorporated platforms located outside of Canada." Valuable. explained at the time
Pre-registration includes heightened expectations regarding the custody and segregated cryptocurrencies on behalf of Canadian clients and a ban on providing margin, credit or other forms of leverage to any Canadian client.
Crypto platforms are also encouraged not to allow customers to purchase or deposit stablecoins and proprietary tokens without CSA's prior written approval. They had 30 days to resolve their situation from the moment the legal notice was posted.
The new rules force Binance out of Canada
These strict regulations have convinced a major player in the cryptocurrency industry to leave the country.
Binance, the largest exchange for Bitcoin and other digital currencies, is leaving the Canadian market. The platform, whose founder and CEO Changpeng Zhao (aka CZ) was Canadian, says its departure from the country is due to the new rules.
“Unfortunately, today we announce that Binance will join other major cryptocurrency companies in actively exiting the Canadian market,” Binance said on May 12. "We would like to thank the regulatory authorities who have worked with us to address the needs of Canadian users."
He continued, “Although it is a small market, [Canada] has sentimental value to us as the home of our founder. We had high hopes for the rest of the Canadian blockchain industry.
“Unfortunately, the new stablecoin guidelines and investor limits provided by the cryptocurrency exchange make the Canadian market more difficult for Binance at this time. We are delaying this decision until we can explore other reasonable ways to protect our Canadian users, but it has become clear that there are no other ways ".
Binance has not ruled out returning to the Canadian market one day.
"While we disagree with the new guidance, we look forward to continuing our engagement with Canadian regulators to build a strong and inclusive regulatory framework," the platform said in a statement.
“We are confident that we will one day return to the market when Canadian users will once again have access to a wide range of digital assets.”
The company said its Canadian users will receive instructions about how the decision will affect their accounts.
Get exclusive access to proven portfolio managers and investment strategies with Real Money Pro. start now.