Canadian securities administrators and the Canadian Investment Industry Regulatory Organization (IIROC) have jointly proposed a framework for cryptocurrency exchanges that will stop short sales and margin trading in digital assets.
Canadian securities administrators and IIROC filed a joint consultation document entitled “Proposed Basis for Crypto Active Asset Trading Platforms” on March 14, 2019.
The structure, if approved, is likely to cause riots among cryptocurrency traders, mainly because it intends to deprive them of the two most frequently used trading instruments, namely, short sales and margin trading.
To reduce the risks of potentially manipulative or deceptive activities, in the short term, we want the platforms not to allow dark trade, short sales, or expand margins for their members.
Removing short sales and margin trading as instruments on cryptocurrency exchanges will essentially limit traders to only perform regular spot transactions.
According to Bitcoinist, Japanese regulators approved legislative amendments to the existing law on payment services, limiting the amount of leverage to cryptocurrency exchanges, which can offer their users two to four times their initial deposit. Nevertheless, it is worth noting that Japan has not deprived the possibility of short trading in digital assets.
The proposed structure comes after the scandal associated with the cryptocurrency exchange of Canada QuadrigaCX and the death of its CEO. The deceased was the only one who had personal keys to cold wallets, in which the cryptocurrency of client funds in the amount of $ 250 million was kept.
It seems that this event impressed the legislators, since one of their main points of concern about cryptocurrency storage solutions is the lack of protection on behalf of the trading platform itself.
To the extent that the platform holds or controls investors ’assets, a significant risk is that investors’ assets are not sufficiently accounted for or protected by the platform. As a result, the platform may not have sufficient crypto assets or cash to meet demand or may be vulnerable to theft.
It is not surprising that the proposed rules are aimed at cryptocurrency storage providers, seeking to put them under traditional legislative oversight.
