Canada will ban leveraged trading for its citizens

Key points: 

• Crypto platforms applying to register in Canada must agree to the country’s stricter rules, including a ban on margin and leveraged trading.
• Firms will also have to separate the assets of Canadian clients from their proprietary operations.
• Canadian authorities are largely skeptical of cryptocurrencies, the country's central bank warned that Bitcoin and other tokens are not a "hedge against inflation".
• Securities regulators have cracked down on unregistered firms, naming major platforms such as KuCoin and Binance for failing to gain approval.

Crypto platforms applying to register in Canada must agree to the country’s stricter rules, including a ban on margin and leveraged trading.

Firms will also have to separate the assets of Canadian clients from their proprietary operations, under expanded terms laid out by the Canadian Securities Administrators (CSA) on Monday.

Crypto businesses were told in August that they would need to submit a pre-registration obligation (PRU) to operate while fully registered. According to a CSA release, no deadline has been announced by which PRUs must be received, but platforms will be notified “soon.”

But in light of what the CSA calls “recent events in the crypto market,” PRU will commit platforms to an expanded set of rules and requirements.

“Cryptocurrency trading platforms that have made these commitments agree to abide by enhanced terms and conditions, which include requiring Canadian clients’ assets to be placed in the custody of an appropriate custodian and to separate those assets from the platform’s proprietary trading as part of the Margin or leverage to Canadian clients is prohibited.”

Cryptocurrency raids in Canada

As part of Monday’s announcement, the CSA reiterated its stance that crypto assets are highly speculative.

"Even with these measures in place, crypto assets or financial products related to crypto assets remain high-risk investments," the statement said. “These risks may arise from non-compliance with registration requirements or obligations of crypto trading platforms, interconnectedness within the crypto industry, bankruptcy, hacking attacks, price volatility, and uncertain value propositions of individual assets, among others.”

Canadian authorities are largely skeptical of cryptocurrencies. Prime Minister Justin Trudeau slammed opponents for promoting "problematic, reckless economic ideas" related to crypto, while the country's central bank warned that Bitcoin and other tokens are not a "hedge against inflation".

Earlier this year, the government expanded anti-terrorism legislation to block Bitcoin donations to so-called “freedom convoys” protesting against Covid restrictions.

Meanwhile, securities regulators have cracked down on unregistered firms, naming major platforms such as KuCoin and Binance for failing to gain approval.

But none of that has stopped local pension funds from being hit by some of the biggest explosions in the cryptocurrency space this year, with Caisse de Dépôt investing $150 million in failed bank Celsius and the Ontario Teachers’ Pension Plan investing $95 million in FTX.