Ontario Securities Regulator Bans Nation’s First Registered Crypto Platforms From Trading Tether

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The Ontario Securities Commission has banned two trading platforms offering crypto services from trading Tether, according to regulatory documents released in recent weeks.

Both Toronto-based Wealthsimple and Coinberry are the first companies of their kind licensed to participate in what the Canadian Securities Administrators call “a temporary, time-limited registration framework that would allow crypto asset platforms to operate in a regulated environment, with regulatory requirements tailored to the operations of the crypto asset platform. “

Still, these approvals appear to limit these platforms to a number of approved cryptocurrencies, naming bitcoin, ether, bitcoin cash, and litecoin in particular.

Tether is the only digital asset named in an appendix titled “Prohibited Crypto Assets”.

“The depositor will not trade crypto contracts based on crypto assets, digital or virtual currencies and digital or virtual tokens listed in Annex C to this decision,” note the two approval documents.

Screenshot of Coinberry approval notice

Neither document explains why the platforms in question couldn’t trade Tether. Nonetheless, the documents filed by the OSC include the warning that its “decision should not be taken as a precedent for other depositors.”

An OSC representative wrote to The Block:

“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. CTP recognition [cryptocurrency trading platforms] and through a discretionary waiver with appropriate conditions. “

Christine Duhaime, a Canadian fintech lawyer, told The Block that “when it comes to Tether and Bitfinex, the New York AG report likely did not reassure securities regulators and, to in the eyes of a government regulator, is is likely going to be considered high risk. “

“Until some digital currency companies bind to transparent jurisdiction and digital currency holders have rights that they can exercise if things go wrong, I suspect they will not be allowed to operate in mature regulatory jurisdictions, ”continued Duhaime.

Tether, which issues the USDT, settled a lawsuit with the New York attorney general in February that banned the stablecoin operator from doing business in New York and required it to report more details about its operations. Tether reportedly faces lingering regulatory challenges despite continued expansion of disclosures.

Wider regulatory landscape

As The Block previously reported, securities regulators across Canada, particularly the Ontario Securities Commission, are working to enforce a new principle that exchanges with cryptos in deposit offer de facto securities, even if the cryptocurrencies involved are not themselves securities.

The “crypto contracts”, that is, the agreement between the platform and the user, themselves require risk information that is more akin to trading in securities.

Wealthsimple was the only crypto trading platform that the OSC identified as fully registered before they started to take a closer look at the exchanges. And Coinberry was the only crypto exchange to report to the Ontario Securities Commission before an April deadline, after which the OSC began a series of legal actions to rule out other crypto exchanges.

Wealthsimple is an online brokerage platform that allows users to gain exposure to crypto prices. Similar to Robinhood, users cannot withdraw crypto. Coinberry is more of a classic cryptocurrency exchange that allows withdrawals.

As a Coinberry representative told The Block, this makes the company “the first pure cryptocurrency trading platform in Canada to be fully registered.” The firm did not respond to a question about the regulatory regime that awaits it after these two years.

2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.

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