Crypto Compliance Weekly Newsletter: February 28, 2023
Updated: Mar 10
Canadian Regulator outlines requirements for Crypto Trading Platforms, FAFT held its second plenary, IMF endorses policy framework for crypto assets, and Bank of Zambia testing technology for cryptocurrency regulation.
1. Canadian Regulator outlines enhanced investor protection commitments for Crypto Trading Platforms
The Canadian Securities Administrators (“CSA”) has published an updated notice outlining enhanced investor protection commitments that crypto asset trading platforms (“CTPs”) must follow. The CSA emphasized the risks associated with trading crypto assets, particularly on unregistered platforms based outside of Canada. One of the most important remarks made was that “CTPs that are unregistered but continue to operate in Canada while pursuing registration are expected to provide an enhanced pre-registration undertaking to their principal regulator within 30 days of publication of today’s notice”.
The pre-registration undertakings include enhanced expectations regarding custody and segregation of crypto assets held on behalf of Canadian clients, a prohibition on offering margin, credit, or other forms of leverage to any Canadian client, and restrictions on using crypto assets to determine capital. Registered CTPs and investment funds that invest in crypto assets have been invited to contact the CSA to discuss whether any changes to their registration or related relief may be required.
2. The Financial Action Task Force held its second plenary 22-24
The second Financial Action Task Force (FATF) plenary was held in Paris, with over 200 jurisdictions in attendance. The FATF expressed its condolences to the people of Ukraine for the destruction caused by the Russian Federation’s military invasion of Ukraine and suspended Russia's membership due to their counterproductive aggression against Ukraine. The FATF has also issued guidance to help countries and the private sector enhance the transparency of beneficial ownership and prevent criminals from using opaque corporate structures.
Furthermore, The FATF approved the mutual evaluation reports of Indonesia and Qatar, which are currently implementing measures to counter money laundering and terrorist financing. South Africa and Nigeria were placed under increased monitoring. At the same time, Cambodia and Morocco were removed from the list after addressing their deficiencies in their anti-money laundering and countering the financing of terrorism (AML/CFT) regimes. The FATF has also agreed to publish a report on disrupting the financial flows relating to ransomware and undertake new projects on money laundering and terrorist financing related to cyber-enabled fraud and on the use of crowdfunding for terrorist financing.
3. IMF executive board endorses policy framework on crypto assets, opposing the legal tender status
The executive board of the International Monetary Fund (IMF) has expressed its agreement with the paper “Elements of Effective Policies for Crypto Assets,” which outlines a framework of nine policy principles to address macro-financial, legal and regulatory, and international coordination issues. The board endorsed the paper's position that crypto should not be granted official currency or legal tender status, repeating the principle of “same activity, same risk, same regulation.” The IMF has been vocal in “its opposition to the use of crypto as legal tender well known, especially since El Salvador adopted Bitcoin as its official currency in September 2021”.
4. Bank of Zambia and securities regulator testing technology for cryptocurrency regulation
The Bank of Zambia and the securities regulator are working on testing technology that would allow for the regulation of cryptocurrencies, according to a statement by Zambia's Technology and Science Minister Felix Mutati. The country aims to create an "inclusive digital economy," and the minister believes that cryptocurrency can be a driver for financial inclusion and economic change. Zambia is also aiming to become a technology hub in Africa and is developing digital infrastructure and seeking investment in the sector. Other African countries are also paying close attention to cryptocurrency and working on regulatory frameworks.
Canaria Consulting LLC is a boutique consultancy specializing in developing, enhancing, and maintaining regulatory compliance programs for virtual currency firms. Canaria Consulting was founded to help virtual currency firms meet their regulatory obligations in a way tailored to the unique characteristics of virtual currency and decentralized blockchain technologies.