On February 22, 20233, the Canadian Securities Administrators (CSA) published Staff Notice 21-332, Crypto Asset Trading Platforms: Pre-Registration Undertakings Changes to Enhance Canadian Investor Protection (Staff Notice 21-332). Staff Notice 21-332 follows the CSA’s December 12, 2022 update regarding crypto trading platforms.
Staff Notice 21-332 describes the enhanced investor protection the CSA expects from crypto trading platforms operating. Unregistered crypto trading platforms operating in Canada while pursuing applications for registration and related relief are expected to provide an enhanced pre-registration undertaking to their principal regulator within 30 days of its publication on February 22, 2022.
The CSA expects all crypto trading platforms to adopt enhanced pre-registration undertakings, to continue operating in Canada while pursuing their applications for registration with Canadian securities regulators.
These pre-registration undertakings will include, among other things, enhanced expectations regarding the custody and segregation of crypto assets held on behalf of Canadian clients and a prohibition on offering margin, credit, or other forms of leverage to any Canadian client. They will also prohibit crypto trading platforms from permitting clients to purchase or deposit value-referenced crypto assets (commonly referred to as stable coins) and proprietary tokens without the prior written consent of the CSA.
According to the CSA Staff Notice 21-332, if a crypto trading platform fails to provide an enhanced pre-registration undertaking within the 30 day period, the CSA will take appropriate action including ordering off-boarding of existing Canadian users and imposing restrictions on Canadian users generally; cease trading the crypto trading platforms as well as other penalties and sanctions as may be determined.
CSA Staff Notice 21-332, Crypto Asset Trading Platforms: Pre-Registration Undertakings Changes to Enhance Canadian Investor Protection is available for download from the websites of CSA Members.
For more information, please call Barbara Hendrickson at BAX Securities Law (647) 403-4606.
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