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Paxos, a blockchain and cryptocurrency company that offers stablecoins, custod, and trading services has announced its withdrawal from Canada due to regulatory uncertainty. Due to the country’s vague cryptocurrency regulations, the New York-based firm has decided to withdraw from Canada along with several other companies that have made similar moves.
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In a support post published on April 11, Paxos explained that it will close all unfunded or empty accounts by May 9 and disable all transactions for Canadian customers by June 2. The company asked customers to withdraw their funds from their accounts without delay. Paxos said it will work with the OSC and come back to Canada in the future.
Paxos did not specify the exact reasons for its withdrawal, but it is likely that it is related to the OSC’s new guidance on crypto-asset trading platforms that came into effect on April 19. The guidance requires all platforms that offer trading of securities or derivatives in crypto assets, or of crypto assets that are securities or derivatives, to comply with securities legislation and register with the OSC.
The OSC has given platforms until April 19, 2023 to contact its staff and start compliance discussions. However, some platforms may find it difficult or costly to meet the OSC’s requirements, which include providing investor protection, market integrity and anti-money laundering measures. Paxos may have decided to withdraw from Canada rather than face potential regulatory hurdles or penalties.
Paxos is not the only crypto company to exit Canada in recent months. In March, Bitfinex announced that it will stop serving Canadian customers by April 29. Bitfinex cited “regulatory uncertainty and restrictions” as the main reasons for its decision. In February, Poloniex, another major crypto exchange, also announced its withdrawal from Canada citing “regulatory developments” as the cause.
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The departure of these platforms may leave Canadian customers with fewer options to access crypto-asset trading and other services. However, some platforms have expressed their intention to stay and comply with the OSC’s guidance. For example, Gemini, a crypto exchange and custodian founded by the Winklevoss twins said that it welcomes the OSC’s initiative and that it is “committed to working with regulators in Canada and around the world.”
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The OSC’s guidance is part of a broader effort by Canadian regulators to provide clarity and oversight for the crypto-asset sector. The Canadian regulators of securities and investment industry, the CSA and IIROC, also put out a joint consultation paper in 2019 that suggested a regulatory framework for crypto-asset trading platforms. The paper received feedback from over 70 stakeholders including platforms, industry associations, law firms and individuals.
The CSA and IIROC said that they aim to balance fostering innovation and protecting investors in the crypto-asset space. They recognized that the sector has a global and evolving character and stated their openness to dialogue and collaboration with other regulators and stakeholders.