How are crypto assets regulated?

Securities law requirements in Canada apply to crypto assets and crypto-related products and services that meet the definitions of “security” or “derivative”. Such products and services are regulated by provincial or territorial securities regulators.

Securities legislation may apply in different ways:

1. If the crypto asset itself is a security –Some crypto assets function like traditional securities (such as shares, bonds, evidences of indebtedness or investment contracts). If a crypto asset falls into this category, securities laws apply, including requirements for disclosure, and registration of the intermediary. Any person or company trying to sell you an investment or give you investing advice needs to be registered to do so.
2. If a crypto contract is created – Even if a crypto asset itself isn’t a security, the way it is bought, sold, or held can create a security. For example, this happens when a platform controls the asset on behalf of a user, meaning the investor doesn’t have direct possession or control over it. In these cases, securities regulators consider the arrangement to be a type of investment contract, which would be subject to securities laws.
3. Investment funds holding crypto assets – Securities laws also apply to investment funds that hold crypto assets. If a mutual fund, exchange-traded fund (ETF), or other pooled investment vehicle includes crypto assets, it is generally subject to the same rules that apply to traditional investment funds. These rules ensure that investors receive clear information about the fund’s holdings, risks, and costs and that fund managers operate within a regulated framework.

Canadian securities regulators have issued guidance on some of the types of crypto asset products and services that may be subject to provincial and/or territorial securities laws. Guidance has also been provided on the requirement to be registered under securities laws for entities that offer crypto assets and crypto-related products. Registered firms are subject to regulatory requirements that aim to protect investors.

What are the rules for crypto asset trading platforms?

Crypto asset trading platforms (CTP) allow investors to buy, hold, sell, stake, deposit and withdraw crypto assets. CTPs operating in Ontario must be registered under Ontario securities law. These platforms are subject to regulatory requirements that help protect investors.

If you are considering investing in crypto assets, always work with a registered crypto asset trading platform.

All crypto assets are generally high risk, even if they are available on a registered crypto trading platform. The level of risk is elevated if you use a crypto asset trading platform that is not registered and likely operating illegally. In fact, the OSC has launched enforcement actions against several unregistered crypto asset trading platforms.

You can check if a platform you may be considering has any investor warnings and alerts issued against it. Also, you can check if the crypto asset trading platform has been sanctioned by a member of the Canadian Securities Administrators (CSA) on the Disciplined List. And avoid platforms banned by the CSA. And always work with registered crypto asset trading platform. If you decide to invest in crypto assets through an investment fund that holds crypto assets, check the registration of any person or company trying to sell you the investment or give you investing advice. If they are not registered, the investment may be a scam or fraud.

Crypto assets are generally considered high risk. Purchasing crypto assets is generally a speculative activity and their value and liquidity are highly volatile. Find out more about risks of investing in crypto assets.

What happens to your assets if your crypto asset trading platform goes insolvent?

The Canadian Investor Protection Fund (CIPF) coverage for securities held in an account with an investment dealer upon a member firm’s insolvency explicitly excludes crypto assets.

CIPF does not cover crypto assets held by a member firm on your behalf that are missing at the time of the member firm’s insolvency. If you lost assets, you’ll have to wait for insolvency proceeds to play out which may take years and may result in you not recovering anything or only a portion of your assets.

If you’re considering investing in crypto assets, you should beware of the risks. You could lose some or all of your money.

Canadian Investor Protection Fund coverage explicitly excludes crypto assets.

Who should you contact if you have a question or concern about a CTP?

If you have a concern about a crypto assetAsset Something of value that a company or an individual owns or controls. Examples: buildings, equipment,…+ read full definition trading platform, you may want to contact the securities regulatorSecurities regulator A government agency that enforces the securities act in jurisdiction it has authority over. This…+ read full definition where you live or where the platform is headquartered. In Ontario, you could contact the Ontario Securities Commission (OSCOSC See Ontario Securities Commission.+ read full definition). You could also contact Canadian Investment Regulatory Organization (CIRO), if the platform is registered as a dealer member.

Canadians considering buying or selling crypto assets in Canada, should use platforms registered with Canadian securities regulators. Some of the registered crypto asset trading platforms are members of CIRO.

How OSC resources can help

If you’re thinking about investing in crypto assets, you can consult the OSC’s website for helpful information, including:

• Finding out if a crypto asset trading platform is registered in Ontario. Only consider investing with a registered platform.
• Determining if the crypto asset trading platform has any investor alerts or warnings issued against it. You can also checking if the platform has been sanctioned by a member of the Canadian Securities Administrators (CSA)Canadian Securities Administrators (CSA) The Canadian Securities Administrators (CSA) is an umbrella organization of Canada’s provincial and territorial securities…+ read full definition on the Disciplined List. And avoid platforms banned by the CSA.
• Checking the registration of any person or firm trying to sell you an investmentInvestment An item of value you buy to get income or to grow in value.+ read full definition fund that holds crypto assets.

If you have any questions about crypto assets or you want to report suspected fraud or other possible misconduct, you can reach the OSC Inquiries and Contact Centre using an online form, or call 1-877-785-1555 or email: inquiries@osc.gov.on.ca

For general taxTax A fee the government charges on income, property, and sales. The money goes to finance…+ read full definition information for the most common tax issues related to crypto assets, visit the Canada Revenue Agency.