Coinsquare gets IIROC approval in the crypto world first
Crypto trading platform Coinsquare has crossed the finish line to become a member of the Investment Industry Regulatory Organization of Canada (IIROC) in a first for the Canadian crypto sector.
The regulatory body announced late Wednesday afternoon that Coinsquare is now registered as an investment dealer.
The new registration will entail a number of changes in the stock exchange. It will have to segregate client funds completely through a licensed and insured custodian, be subject to stricter operational controls, keep more capital available and regularly report on the status of the balance sheet.
It also means that cash held in customer accounts will be insured by the Canadian Investment Protection Funds.
“I personally think it’s a very big deal,” said Matt Burgoyne, a partner and co-chair of digital assets and blockchain at Osler, Hoskin & Harcourt LLP. Yahoo Finance Canada in a telephone interview.
“[IIROC] is historically a very conservative organization that licenses investment broker-dealers. Then, the more traditional financial sector. IIROC welcoming and accepting for registration a cryptocurrency exchange with retail users is a very significant development in the world of securities and in the world of cryptocurrency.”
Coinsquare has also been approved to operate an automated trading system, which allows it to facilitate trading of illiquid coins, a practice common in traditional stock markets.
The platform will not be able to offer trading on margin or short selling, although it plans to work to offer these services in the future.
However, the ability to trade on margin could potentially add more risk to the already wildly volatile world of cryptocurrencies.
Burgoyne says there likely needs to be more “risk disclosure and education conveyed by the platform to the user” if Coinsquare wants to offer leverage.
The company will not offer products such as bitcoin exchange-traded funds, and clients will still only be able to purchase a maximum of $30,000 in crypto assets in most provinces.
“For the first time, Canadians have the opportunity to invest in cryptoassets knowing they have full IIROC protection,” Martin Piszel, CEO of Coinsquare, said in a press release.
Coinsquare says it serves more than half a million Canadian customers.
The need for investor protection in the crypto trading world has consistently been at the forefront amid high-profile thefts of client funds and a myriad of crypto-related scams and scandals.
Just this week, trading platform Mango Markets reported that $100 million in funds were stolen during a cyber hack.
In 2021, securities regulators deemed cryptocurrency exchanges effectively falling under their jurisdiction and required them to register as dealers with limited terms to continue operating their marketplaces. The regulators also gave the platforms two years to work towards being registered as investment dealers with IIROC, the highest category of securities dealer registration.
All cryptocurrency exchanges currently registered as limited dealers are working towards their investment dealer registration with IIROC.
On an international scale, Burgoyne says this brings Coinsquare one step closer to being able to compete better.
“The competitors of the Canadian crypto exchanges are large international crypto exchanges located offshore that offer all these different services and products like margin, futures trading, leverage,” he said.
“Right now, not all regulated Canadian exchanges can extend margin, credit or other forms of leverage, so they lose a competitive advantage to the large offshore international exchanges. Hopefully, the Canadian IIROC-registered exchanges like Coinsquare will soon be able to offer margin and influence that would level the playing field a bit.”
Michelle Zadikian is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @m_zadikian.
Download the Yahoo Finance app, available for apple and Android.
