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Capital market regulators in Canada are planning to establish new rules to curb the risks associated with cryptocurrency trading platforms. This follows the sudden death of Gerald Cotten, founder and chief executive officer of crypto exchange Quadrigacx, which led to about $145 million in frozen or missing cryptocurrencies.

Also read: Bitcoin Exchange Gatecoin Shuts Down Citing Financial Difficulty

In a joint new consultation paper on March 14, the Canadian Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) spoke of the need to come up with tailored requirements to address the “novel features and risks” of digital currency exchanges.

“We must adapt to innovation, and provide clarity to the market about how regulatory requirements might best be tailored and applied to these unique business models, while maintaining investor protection,” the regulators detailed.

“We endeavor to facilitate innovation that benefits investors and our capital markets, while ensuring that we have the appropriate tools and understanding to keep pace with evolving markets,” they added.

Cotten died in India on Dec. 9 without revealing the keys to cold wallets containing CAD $190 million (~US $145 million). A Nova Scotia Supreme Court judge in February granted Quadriga’s request for creditor protection from as many as 115,000 customers. Investigations by Ernst & Young, the court-appointed monitor in the case, have given little hope the funds will ever be recovered.

However, the Quadrigacx saga has exposed a gap in the Canadian cryptocurrency industry regulation system, prompting investors to query who would be held accountable in the event of a loss. In the past few months, industry players and other concerned stakeholders have increased calls for regulation, although some legal experts are curious to know whether securities regulators have jurisdiction over the asset class.

Faced with such a tricky situation, the CSA and IIROC have now resolved not only to provide clarity for cryptocurrency businesses, but also to create greater market integrity and address investor protection risks, explaining:

Regulators around the world are currently considering important issues surrounding the regulation of crypto assets including the appropriate regulation of platforms. We intend to use this feedback to establish a framework that provides regulatory clarity to platforms, addresses risks to investors and creates greater market integrity.

The consultation paper solicits input from the financial technology community, market participants, investors and other stakeholders on how requirements may be tailored for digital currency exchanges operating in Canada. It comes at a time when interest in crypto assets among investors, governments and regulators globally has increased significantly since the creation of Bitcoin in 2008.

The total value of crypto assets grew to $800 billion in early 2018, and although the value has since fallen due to market volatilities, interest in cryptocurrencies remains high. There are currently over 2,000 crypto assets that may be traded for government-issued currencies or other types of crypto assets on over 200 platforms that facilitate the buying, selling and transferring of crypto assets.

But there are concerns by government overlords that lack of regulatory oversight on these platforms may have spurred increased fraudulent activities involving cryptocurrencies, thereby curtailing investment. According to the Globe and Mail, many Canadian cryptocurrency exchanges are taking steps to address customer concerns and guarantee investor fund protection following the Quadrigacx event.

For example, Toronto-based Bitbuy has simulated a number of disasters – including nuclear attacks and the sudden passing of all of its directors – to ensure that customers would still be able to access their funds, the newspaper reported. Bitbuy also recently hired a U.S.-based blockchain forensics company to review its solvency status, its methods for storing cryptocurrency, and its asset segregation practices, it said.

What do you think about cryptocurrency regulation in Canada? Let us know in the comments section below.

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The post Canadian Capital Market Regulators Mull New Cryptocurrency Rules appeared first on Bitcoin News.

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