Canadian Securities Administrators warn investors about risks of crypto asset trading
On November 21, 2022, The Canadian Securities Administrators (the “CSA”) issued a warning regarding the elevated risks that investors face when trading in crypto assets. The high volatility in the value and liquidity of crypto assets may not be suitable for certain investors, particularly retail investors.
The CSA warned that there are currently unregistered crypto asset trading platforms (“CATPs”) accessible to Canadians, which may not provide the same investor protections as CATPs registered under Canadian securities laws. According to the CSA website there are currently ten registered CATPs in Canada.
The CSA further reminded investors that while regulatory oversight aims to protect investors, it does not eliminate all of the risks associated with CATPs. The warning advises that investors should be aware that trading crypto assets requires considerable time, knowledge, skill and research. It also suggests that investors seek professional advice and evaluate other options before investing in crypto assets.
The CSA warning comes at a time when crypto assets have been under increased scrutiny, as crypto asset prices have declined throughout much of the year. At the time of writing, Bitcoin (BTC) has lost over 60 percent of its value since the beginning of 2022.
On March 29, 2021, the Ontario Securities Commission notified CATPs that offer trading in derivatives or securities that they must bring their operations into compliance with Ontario securities laws or face regulatory action. On August 15, 2022, the CSA published a notice that it now expects CATPs to provide a “pre-registration undertaking” to their principal regulator in order to continue their operations while completing the registration process. The pre-registration undertaking includes terms and conditions that address investor protection concerns, which CATPs must comply with.
