Canada bans cryptocurrency leverage and margin trading after FTX crash

Canadian authorities are taking steps to better protect Canadian cryptocurrency investors in the aftermath of the FTX crash and the spread of contagion.

The Canadian Securities Administrators (CSA), the board of Canadian provincial and territorial securities regulators, on Dec. 13 released an update on the cryptocurrency trading platforms operating in the country.

The CSA said the authority has strengthened its approach to overseeing cryptocurrency trading platforms by expanding existing requirements.

According to the statement, all cryptocurrency trading firms operating in Canada, both local and foreign, must comply with the new extended terms, which prohibit them from offering margin or leveraged trading services to any Canadian client.

The extended terms also require cryptocurrency exchange service providers in Canada to separate their custody business from their platform owning business.

“Depositories will generally be considered qualified if they are regulated by a financial regulator in Canada, the United States or a similar jurisdiction with a supervisory regime for financial conduct and regulation,” the CSA noted in the statement.

The board stressed that even with these measures in place, cryptocurrencies or any cryptocurrency-related financial products are high-risk investments, urging investors to invest only using a platform registered with CSA members.

The CSA did not immediately respond to Cointelegraph’s request for comment.

In the new statement, the CSA mentioned its previous notice to cryptocurrency trading platforms operating in Canada, issued on August 15, 2022. The authority said it expects commitments from unregistered cryptocurrency trading platforms operating in Canada while pursue registration in the form of a pre-registration company.

The CSA communication came shortly after FTX entered into an agreement to purchase Canadian crypto platform Bitvo in June 2022. FTX initially planned to use the acquisition as part of its global expansion plans. However, Bitvo was eventually able to finish the takeover by the now-defunct exchange, which allowed the company to continue operating even after the collapse of FTX.

Related: The SEC accuses the former CEO of FTX SBF of defrauding investors the day after his arrest

Pamela Draper, CEO of Bitvo, told Cointelegraph in November that the acquisition was not completed because the companies were working to meet closing conditions, the most significant of which was regulatory approval from the Alberta Securities Commission.