LiquiTrade Found Guilty of Operating Illegally in Canada by BCSC

LiquiTrade Found Guilty of Operating Illegally in Canada by BCSC

LiquiTrade, the operator behind the Latoken crypto exchange, has been found guilty of illegally operating an exchange in Canada. This verdict comes from a panel established by the British Columbia Securities Commission (BCSC).

Background of the Case

The accusations against LiquiTrade surfaced in November 2022, alleging the company had violated Canada’s Securities Act by facilitating daily transactions worth $300 million for its 1.5 million users. After nearly two years of investigation, the BCSC panel concluded that LiquiTrade had indeed breached Canadian securities laws.

Violations and Findings

The BCSC panel determined that LiquiTrade had never been registered under the Securities Act and was not recognized as an exchange or clearing agency in British Columbia. Furthermore, the panel revealed that LiquiTrade allowed users to trade contractual rights of underlying crypto assets, which were considered derivatives investments. This trading required registration under the Securities Act, which LiquiTrade did not obtain, thus operating as an unauthorized exchange.

Broader Regulatory Context

LiquiTrade joins the ranks of other banned platforms in Canada, including Catalyx, KuCoin, Poloniex, and xt.com. In contrast, there are 15 authorized crypto trading platforms in the region, including notable names like Bitbuy, Coinbase, and Fidelity. The sanctions against LiquiTrade, expected to be imposed by August 14, could range from monetary penalties to a complete ban on its services.

Increasing Regulatory Scrutiny in Canada

Canada has seen several crypto firms exit the market due to increasing regulatory scrutiny. In October, Binance, the world’s largest crypto exchange, withdrew from Canada, citing new guidance on stablecoins and investor limits. Similarly, OKX announced its exit in March, blaming new regulations. Other notable exits include Bybit, Paxos, dYdX, and Bittrex.

In February 2023, the Canadian Securities Administrators (CSA) introduced new rules requiring crypto firms to commit to protecting investors through an “enhanced pre-registration undertaking.” These rules mandate firms to segregate crypto custody, employ a chief compliance officer, eliminate leveraged trading, and prohibit trading or holding stablecoins.

Continued Commitment to Canadian Market

Despite the regulatory challenges, some exchanges remain committed to the Canadian market. Coinbase, for example, has appointed a former Shopify executive as its new country director in Canada as part of its strategy to adapt to the evolving regulatory landscape.

Rising Crypto Scams

In response to a surge in crypto scams targeting Canadian citizens, the Canadian Anti-Fraud Centre (CAFC), in collaboration with the Canadian Investment Regulatory Organization (CIRO), issued a warning earlier this year. They aim to raise awareness about sophisticated scams, particularly those involving prolonged online communication.

LiquiTrade’s case highlights the growing regulatory challenges and scrutiny faced by crypto exchanges in Canada, reflecting the country’s stringent approach to ensuring compliance and investor protection in the evolving crypto market.

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