Crypto platform Binance claims miscommunication with Canadian regulators

Cryptocurrency platform Binance says a miscommunication with Canadian regulators led to a warning from the Ontario Securities Commission that the company is not authorized to do business in the province.

On Thursday, the OSC told investors that Binance one of the worlds largest cryto traders is not registered in Ontario and therefore not authorized to sell derivatives or securities in the province. The commission said the announcement was prompted by a message this week from Binance to its customers suggesting it would continue to operate in Canada despite previously saying it would pull out of Ontario rather than face regulation.

Binance represented to OSC staff that no new transactions involving Ontario residents would occur after December 31, 2021, the OSC said in its news release. Binance has issued a notice to users, without any notification to the OSC, rescinding this commitment. This is unacceptable.

In an e-mail to The Globe and Mail, Binance spokeswoman Hazel Watts said: Following discussions with the Canadian securities regulators about Binances intention to seek dealer registration in Canada, earlier in the week we notified users in Ontario that they did not need to close their accounts by December 31, 2021. It is our top priority to speak to the Ontario Securities Commission and will seek to remedy this misunderstanding as soon as possible. Binance continues to be committed to complying with the regulatory regime in Canada.

Ms. Watts did not immediately respond to follow-up questions about whether Binance would put a halt to Ontario customers trading on Jan. 1 until it gets clarity from the OSC.

An OSC spokesman declined to immediately comment Friday when presented with the platforms statement.

Binance told users in June that it would cease operations in Ontario after opting not to register as a regulated crypto trading platform with the OSC. In a blog post to account holders, the Cayman Islands-based exchange said Ontario would become a restricted jurisdiction and advised users in the province to close their accounts by Dec. 31.

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However, on Dec. 26, Binance founder and chief executive officer Changpeng Zhao tweeted a link to the companys Christmas Eve registration of Calgary-based Binance Canada Capital Markets Inc. with FINTRAC (the federal Financial Transactions and Reports Analysis Centre of Canada) as a money-services business.

Binances messages led crypto-focused media to report this week that the company would continue to operate in Canada. CoinDesk, in a story headlined Binance to Continue Operating in Ontario After Co-operating With Canadian Regulators, quoted a company message to customers saying: As a result of ongoing and positive co-operation with Canadian regulators, Binance in Canada has been successful in taking its first steps on the regulatory path. … This [FINTRAC] registration allows us to continue our operations in Canada and resume business in Ontario while we pursue full registration.

Binance has come under scrutiny from regulators around the world. The Dutch central bank said in August that the trading platform was not in compliance with its anti-money laundering and anti-terrorist financing laws. Regulators in Japan, Britain, Germany, Italy, Hong Kong and Malaysia also issued warnings against Binance this year.

This past March, the Canadian Securities Administrators, the umbrella group of provincial and territorial securities commissions, issued guidelines on how to regulate crypto exchanges. The CSA determined these businesses are essentially securities dealers because they facilitate trades.

The OSC said platforms that offer their services to Ontarians are subject to regulation, regardless of where they are based. It warned platforms that they must contact OSC staff by mid-April to discuss how to bring their operations into compliance or face potential regulatory action.

There are now six crypto asset trading platforms registered in Ontario: Wealthsimple, Coinberry, Netcoins, Coinsmart, Fidelity and Bitbuy.

Globally, more than US$2-trillion is now invested in crypto assets, more than the total amount managed by Canadian mutual funds and exchange-traded funds.

With files from Tim Kiladze, Vanmala Subramaniam and Reuters

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