Published: September 30th, 2020
Wealthsimple has announced the launch of the first regulated crypto platform in Canada. The rollout follows a regulatory approval by Canadian Securities Administrators in early August. The new platform is regulated by Canada’s federal government and regulators in the country’s 10 provinces as well as the three territories.
Following the regulatory sandbox authorization by Canadian Securities Administrators (CSA), the umbrella body of regulators in the provinces and territories in Canada, that improve, coordinate, and harmonize capital markets in Canada, Wealthsimple has announced that it is launching the country’s first regulated crypto platform.
The novel crypto exchange will be regulated by the federal regulator in Canada and the relevant agencies in 10 provinces and the 3 territories in Canada. The Canadian online investment management service provider that targets millennials announced on Tuesday, September 22, that its cryptocurrency exchange is soon going live.
Wealthsimple reiterated that its platform is the first regulated cryptocurrency exchange in Canada. It added in the announcement that the platform will offer neither minimums nor fees for both withdrawals and deposits. The memo specified that users can now safely buy and sell Bitcoin and Ethereum, the globe’s two most significant cryptocurrencies, using Wealthsimple Crypto.
The company’s cryptocurrency subsidiary, Wealthsimple Digital Assets Inc. (WDA), got regulatory approval from CSA on August 7. The license allows the company to set up a crypto trading platform. Wealthsimple had applied for exemptive relief from all the relevant Canadian agencies as prescribed on the CSA staff guidance. The ordinance provides a dictum on the licensing procedures and securities legislation for firms that facilitate the crypto assets trade.
CSA brings together securities regulators from each of the three territories and 10 provinces in Canada.
Wealthsimple said that the cryptocurrencies traded on its platform are kept by Gemini Trust Company, a regulated cryptocurrency custodian based in New York which has more than $200 million in cold storage insurance coverage.
Users who create dedicated Wealthsimple Crypto accounts can buy, hold, and sell their crypto wealth within the platform’s trade app.
The app can also be used to buy and sell bonds, stocks, and exchange-traded funds (EFTs). The company stated that deposits and withdrawals can only happen in Canadian dollars.
Gemini Trust Company brings with it a considerable amount of credibility and experience. The New York-headquartered digital currency exchange and crypto custodian only recently received a Financial Conduct Authority (FCA) nod to offer cryptocurrency-related services in the U.K.
Because of the authorization, Gemini will offer cryptocurrency exchange and custody services to both individuals and institutional customers in pounds sterling.
Aside from the simple user interface that aims to improve UX, Wealthsimple reiterated that compliance is just a priority as is every other aspect of running a credible business. The company’s general counsel, Blair Wiley, noted in a press release first published on Bitcoin.com, that his company is regulated in all of Canada’s 13 provinces and territories.
Blair also added that the federal government of Canada also regulates Wealthsimple.
The press release reads in part that WDA is registered in all the jurisdictions of Canada other than Québec, as a restricted dealer. In Québec, WDA is registered as a derivatives dealer. The company claims in the release that it has offices in Toronto, London, and New York.
Besides, it has some 175,000 users worldwide, the press release added.
Compliance has been an Achilles heel of crypto trading in Canada. The field is murky with not so very fortunate events happening in the recent past. In July 2020, Cole Diamond, the CEO of Coinsquare, a leading Canadian cryptocurrency exchange, and Virgile Rostand, the company’s president, were fined $1,000,000 and $900,000, respectively and forced to resign from their positions over allegations of wash trading.
In 2017, local press reported that Canadians had lost almost $2 million to cryptocurrency scams, about double the amount lost a year before. However, a significant portion of the money lost during this time involved scams where fraudsters demanded fund transfer from their victims.
A real incident where people lost money in a crypto exchange because of lax regulation goes back about two years ago. In January 2019, QuadrigaCX, by then the leading crypto exchange in Canada, reported that its CEO Gerald Cotten had died while honeymooning in India.
The announcement added that only Cotten had the keys to the exchange’s wallets. As a result, more than 76,000 clients stood to lose about $215 million in assets. Ernst & Young was appointed as the bankruptcy trustee, and after the firm’s efforts, it recovered or identified a paltry $46 million to be paid out to QuadrigaCX’s clients.
The Ontario Securities Commission’s (OSC) investigations unearthed a raft of anomalies which included unchecked and undetected misuse of clients’ money by the exchange’s CEO. In the end, the incident created a shortfall of about $169 million out of which $115 million was lost via Cotten’s dishonest conduct, which manifested took many forms.
The QuadrigaCX’s case points to the need for properly regulated cryptocurrency exchanges in the Canadian digital currency marketplace. The OSC staff said in their report about QuadrigaCX that Cotten opened exchange accounts using aliases, credited his accounts with fictitious crypto balances and currency, and traded with unsuspecting QuadrigaCX exchange clients.
The report added that Cotten sustained substantial losses when crypto prices shifted and incurred shortfalls while trying to meet clients’ withdrawal requirements. Since the exchange covered the losses using other clients’ deposits, it meant that Cotten’s exchange operated a lot like a Ponzi scheme.
Blair said that Wealthsimple comes to the scene to eliminate the overt failures that QuadrigaCX manifested. He added that the Canadian cryptocurrency exchange environment needs a properly regulated entity and he is happy that Wealthsimple is stepping up to fill the void.
Wealthsimple has announced the launch of its crypto exchange that is said is the first regulated crypto bourse in Canada. The launch follows an authorization by CSA, the umbrella body that brings together capital markets regulation agencies in Canada. Wealthsimple will use the crypto custodianship services of the Gemini Trust Company to safeguard customer deposits.