It seems like every week there's a new headline about some major crypto exchange packing up and leaving Canada. Just recently, Gemini announced it was closing its doors to Canadian customers, following in the footsteps of Binance and OKX. So what's going on? Well, it all comes down to our country's stringent crypto regulations.
The Regulatory Landscape
Canada has been ahead of the game when it comes to regulating cryptocurrencies. Our framework is pretty comprehensive, requiring all crypto trading platforms (CTPs) to register with provincial regulators and classify as money service businesses (MSBs) under the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). The Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) are also heavily involved in overseeing these platforms.
Recent notices from the CSA have made it clear: if you're a CTP operating in Canada, you better be compliant. And those that aren't? Well, they're packing up and leaving.
The Exodus Begins
The latest casualty in this exodus is Gemini, which will close all customer accounts in Canada by December 31, 2023. This follows a long list of exits from major exchanges; just this year alone we've seen Binance, OKX, Bybit, dYdX, and Paxos all leave.
So what does this mean for Canadians? For one, it's reducing our access to crypto services. With fewer options available, many might be tempted to turn to less regulated or even offshore platforms—risking their funds in the process.
Economic Fallout
The closure of these exchanges isn't just an inconvenience; it's an economic hit too. Local businesses that relied on these platforms are feeling the sting. Remember when QuadrigaCX collapsed? That left a lot of people—and businesses—out in the cold.
And let's not forget about innovation. A regulatory environment as strict as ours might deter new startups from setting up shop here. If they can't operate freely and openly, why would they come?
Looking Ahead: Room for New Players?
While it's easy to see doom and gloom in the current situation, there might be a silver lining: the exit of non-compliant players could pave the way for new ones that prioritize adherence to regulations.
Gemini's recent settlement—which included returning funds to users through regulatory intervention—highlights how effective such frameworks can be. Perhaps new platforms will emerge that learned from Gemini's experience.
Global Perspectives
It's interesting to compare our situation with other countries' approaches:
- United States: A patchwork of regulations where major bodies like the SEC are actively cracking down.
- United Kingdom: Has extended existing laws to cover all crypto assets.
- Japan: Recognizes cryptocurrencies as legal property but has strict requirements for exchanges.
- Australia: Is moving towards a new licensing framework for exchanges.
- European Union: Has varied approaches across member states but is tightening KYC obligations.
Summary
Canada's stringent crypto regulations have certainly led to some major changes—and not just for us. As more countries look at Canada's approach, we may very well be witnessing a global shift in how cryptocurrencies are regulated.
For better or worse? Only time will tell.
