Canada’s crypto winter: Binance and other major exchanges have withdrawn, and mining shares have been halved
Original Author: Nancy, PANews
Original Author: Nancy, PANews
Canada is accelerating the tightening of regulations in the encryption field. In February of this year, after the Canadian Securities Regulatory Agency (CSA) introduced strict regulatory requirements, trading platforms such as Binance, OKX and Bybit announced their withdrawal one after another. These platforms were accused or fined by the Ontario Securities Commission (OSC) before their withdrawal. .
Coinbase, Kraken and Gemini have chosen to remain in the Canadian market and have signed a pre-registration commitment with Canadian regulators. Among them, Kraken stated that after several other competitors withdrew, its customer deposits increased by 25% in a few weeks. Downloads increased fivefold.
Canada’s regulatory environment continues to tighten, and encryption development has come to an abrupt stop
According to the new encryption regulations issued by the CSA, exchanges and other platforms are required to comply with "enhanced investor protection commitments" and stipulate that encryption trading platforms operating in Canada must apply for registration within 30 days. The regulator provided an enhanced pre-registration commitment, and was also required to make some new commitments to crypto asset trading platforms (CTPs) operating in Canada and complete them by March 24, including the need to segregate custody of user assets for transactions, prohibiting transactions to any Canadian users provide margin or any form of leveraged trading and prohibit the sale of stable coins and proprietary tokens (platform coins) without CSA permission.
It is reported that the update of CSA’s encryption regulatory system was promoted by OSC. The Ontario Securities Commission is responsible for administering the Ontario Securities Act and Commodity Futures Act. It is Canada's largest securities regulator and owns and governs the Toronto Stock Exchange.
For crypto exchanges operating in Canada, increased regulation will undoubtedly increase their compliance costs. However, if they are unable or unwilling to comply with the CSA, they are required to take appropriate steps to opt out existing Canadian users and impose restrictions to prevent Canadian users from accessing their products or services.
And this kind of supervision method, compared with exchanges such as Binance who chose to withdraw to show "protest", Coinbase, which does not issue platform currency, agrees. Not long ago, Nana Murugesan, vice president of international and business development at Coinbase, said that he prefers Canada’s regulatory approach to that of the United States. “Coinbase sees two ways for regulators to act: one is participatory regulation; the other is regulation through enforcement. The latter is difficult because practitioners don’t know what the rules are. But regulators in Canada are definitely the former , Coinbase likes this kind of participatory regulation.”
In fact, since last year, Canada has continued to take crypto regulatory actions, including banning margin/leverage trading of cryptocurrencies, suspending new crypto mining projects, etc., which has also slowed down the country's development in the crypto field significantly. For example, once one of the mining powerhouses, Canada’s crypto mining share has also plummeted due to government regulation. Chainbulletin.com's global Bitcoin mining map shows that as of June 2, Canada owned 6.48% of the network's Bitcoin computing power, and its market share in 2021 will be about 13%.
As another example, portfolio managers associated with Canada’s largest bank, Royal Bank of Canada (RBC), began to significantly reduce their holdings of encrypted stocks in the first quarter of this year. According to RBC filings with the U.S. Securities and Exchange Commission (SEC) totaling 34 affiliated entities (including external asset managers with which RBC does business), some crypto stocks were completely removed, including troubled crypto-friendly bank Signature and Bitcoin. Coin mining companies Argo, Mawson Infrastructure and Iris Energy. At the same time, these entities also reduced their holdings of cryptocurrency-related concept stocks, such as two-thirds of Bakkt shares, one-third of MicroStrategy shares, and 11% of Coinbase shares.
What are the reasons behind the regulatory upgrade?
Canada was once regarded as one of the encryption-friendly countries, including the world's first Bitcoin ATM machine will be launched in Vancouver, Canada in 2013, the world's first national law on digital currency was passed in 2014, and the world's first Bitcoin ATM was launched in 2021. A Bitcoin ETF etc. It can be said that Canada has been at the forefront of crypto innovation.
There are actually many reasons behind the tightening of Canada's encryption regulatory environment: On the one hand, Canada has exposed multiple encryption scandals one after another. For example, at the end of 2018, Gerald Cotten, the founder of Quadriga, Canada's largest cryptocurrency exchange, passed away suddenly while traveling in India, resulting in the irrecoverable funds of about 115,000 users worth over US$190 million. The OSC's investigation into the platform's collapse revealed that the exchange "operated like a Ponzi scheme" and revealed that the founder misappropriated customer funds to support his extravagant life and used them in fake accounts set up by other exchanges. Make transactions etc. Not long after, the British Columbia Securities Commission (BCSC), the Canadian financial regulator, was revealed not only to have never implemented supervision on Quadriga, but also to be questioned that it had exhausted all the funds in the exchange’s wallet during the seizure of the encryption exchange Einstein, with a total amount of Between $8 million and $10 million.
On the other hand, multiple pension funds in Canada suffered losses due to crypto investments and attracted the attention of the government. For example, the Ontario Teachers' Pension Fund (OTPP), which has been ranked among the top five pension funds in Canada all year round, invested a total of US$75 million in FTX and FTX US in October 2021, and an additional US$20 million in FTX US in January 2022 Although the two investments accounted for less than 0.05% of the total net assets of the pension fund, the fund stopped getting involved in the encryption field after the investment was written down to zero; Canada's second largest pension fund, Caisse de Depot et al. Placement du Quebec invested US$150 million in the bankrupt encrypted lending platform Celsius Network; Canada's third largest pension fund, Teachers, participated in FTX's US$420 million financing in October 2021 at a valuation of US$25 billion. The incident faced huge investment losses; the Ontario Municipal Employees Retirement System (OMERS) had participated in investing in some encrypted assets before exiting; Canada’s largest pension fund, CPP Investments (CPPI), stated that it would no longer study investment opportunities in the field of digital assets. In this regard, the Canadian federal government pointed out in the new 2023 budget plan that in order to help protect Canadian retirees, the government will require federally regulated pension funds to disclose their exposure to encrypted assets to the Canadian Financial Supervisory Authority (OSFI).
