One of the greatest signs of progress in the crypto industry is the fact that more and more laws are created across the globe to cater to the crypto community and also to define the extent of its responsibilities. Even as we enter a new decade and cryptocurrency is bound to see a greater explosion of use and projects such as Libra and China’s upcoming cryptocurrency are bringing more conversations about crypto to the forefront, more and more regulators around the world are finding cryptocurrency impossible to ignore and as such, the industry is becoming better regulated and overseen.
The Canadian Securities Administration (CSA) has issued new guidelines about what crypto trading platforms will be falling on the derivatives laws and which will not.
CSA Issues New Guidelines
The guideline in question is the “Guidance on the Application of Securities Legislation to Entities Facilitating the Trading of Crypto Assets” which was published on January 16, 2020, and has received further clarifications from the CSA. The major clarification was made between crypto firms that deliver cryptocurrency immediately to the customers upon request and those that hold onto the request and fulfill it on a later date.
Following an analysis of trading practices, the CSA determined that firms that give customers a claim to the assets but do not deliver it immediately will fall under the derivatives law.
“Potentially, there will be ongoing reliance and dependence of the user on the Platform until the transfer to a user-controlled wallet is made. Until then, the user would not have ownership, possession and control of the crypto assets without reliance on the Platform. The user would be subject to ongoing exposure to insolvency risk (credit risk), fraud risk, performance risk and proficiency risk on the part of Platform,” the statement said.
Firms that will not be under the derivatives law are those in which the underlining asset is not a security or derivative and those who immediately deliver the crypto assets to consumers and do not wait until a later date. This sort of regulation helps give great clarity to industry practices and creating some uniformity across the board which is greatly needed.