The Canadian Securities Administration published a notice saying that they plan to outline the difference between exchanges that immediately deliver the digital asset or crypto coin to the user, and those that hold them in a custody-like arrangement for the user.
Securities law would apply to exchanges that hold crypto for users.
The Canadian Securities Administration wrote in its notice, “In our view, a mere book entry does not constitute delivery, because of the ongoing reliance and dependence of the user on the Platform in order to eventually receive the crypto asset when requested.” The agency noted that the terms of the transaction require that the entire quantity of crypto assets purchased from the platform or counterparty seller be immediately transferred to a wallet that is in the sole control of the user, then the securities law would not apply.
Regulators took action in the light of increase frauds.
Canadian regulators published these new guidelines after two major Canadian crypto exchanges collapsed under allegations of fraud. QuadrigaCX, which ceased operations in early 2019 after the company’s CEO and founder Gerald William Cotten died in India in 2018 with the codes to over $200 million worth funds of exchange users. Recently, the lawyer of users who lost money with the exchange had asked for the exhumation of the body of Gerald William Cotten.