Canadian cryptocurrency exchange Kraken has criticised regulations the Canadian Securities Administrators and the Investment Industry Regulatory Organization of Canada have proposed. According to the exchange, proposed regulations characterise the contract between an exchange and an exchange user as security.
Kraken states it is crucial regulators continue differentiating between “crypto assets that are securities under existing Canadian law and crypto assets that operate solely as a form of payment.” Cryptocurrencies, Kraken writes, should not be treated as securities under Canadian law.
According to Kraken, exchanges operate “as custodians or bailees.” The exchange explains that “the assets are legally owned by the customer and not the Exchange operator. This means, critically, that the customer’s interest is not derived from the underlying asset — it IS the underlying asset. The application of a securities law framework, accordingly, is both unnecessary and inappropriate to this structure.”
The exchange argues imposing securities law on cryptocurrency exchanges would prompt Canadian exchanges to move offshore instead of instigating better protections for customers. It also claims the framework would not “achieve the goal of regulatory clarity.”
Kraken claims exchanges are doing well by self-regulating and introducing security measures. “Without the cudgel of regulation, Exchanges are developing proof-of-reserve techniques, obtaining SOC certifications and enhancing their security and internal controls.”