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Crypto exchange Kraken has filed a pre-registration undertaking (PRU) with the Ontario Securities Commission to provide more investor protection.
The new registration would see the exchange become a Restricted Dealer throughout Canada. It follows a revised investor protection guidance issued by the Canadian Securities Administrators.
Kraken Takes on Challenge for Greater Investor Protection
“The PRU will help maintain the integrity of our operations and help all Canadians gain financial freedom through crypto,” Kraken said in a blog post.
Currently, Kraken offers Canadians CAD spot trading pairs and employs 250 Canadians.
The CSA introduced enhanced investor protection in Feb. 2023. Under the new regime, a PRU includes improved custody and separation of customer funds. Exchanges cannot offer Canadian investors margin or leveraged trading nor allow them to buy or deposit stablecoins.
Following the amended regulations, several Kraken competitors, such as OKX, Blockchain.com, and Deribit, exited Canada.
Recently, Kraken agreed to pay the U.S. Securities and Exchange Commission $30 million to settle allegations that the exchange offered its staking product as an unregistered security to U.S. customers. It subsequently ceased offering its crypto asset staking product to U.S. customers.
SEC Will Use $2.4 Billion to Strengthen Enforcement Team
Crypto industry players in the U.S., including Coinbase Chief Legal Officer Paul Grewal, have criticized the SEC for regulating by enforcement actions rather than providing rules.
The SEC drafts rules based on existing U.S. securities laws. So far, it has not defined which crypto assets or transactions constitute a security. SEC Chairman Gary Gensler has said that existing securities laws, such as the Securities Act of 1933 and the Securities Exchange Act of 1934, provide enough guidance.
In addition to the lawsuit against Kraken, the SEC has served Coinbase with a Wells Notice. In the notice, the SEC alleged that certain crypto assets Coinbase lists are securities. The agency served stablecoin issuer Paxos with a notice last month, alleging that its BUSD stablecoin constitutes an unregistered security.
U.S. President Joe Biden recently requested $2.4 billion to be allocated to the SEC in a move that may bode ill for the crypto industry.
In a prepared testimony on March 29, 2023, Gensler affirmed that the funding could help the SEC hire additional enforcement staff and to help limit bad behavior in the crypto industry. He said that most of the crypto industry was still a wild west, which prompted the SEC to issue 36% more enforcement actions in 2022 than in 2021.
Gary Gensler is scheduled to appear before the House Financial Services digital assets subcommittee on April 18, 2023. He will be asked to clarify his approach to rulemaking and digital assets here.
In other securities news, the Thai securities exchange recently confirmed it would remove limits for retail investors buying tokens in initial coin offerings.