OSC takes action against non-compliant international crypto asset trading platform

Action follows opportunity for firms to bring their operations into compliance

TORONTO – The Ontario Securities Commission (OSC) today published a Statement of Allegations against Polo Digital Assets, Ltd. (Poloniex) for failing to comply with Ontario securities law. Poloniex, incorporated in the Republic of Seychelles, is operating an unregistered crypto asset trading platform, encouraging Canadians to use the platform, and allowing Ontario residents to trade crypto asset products that are securities and derivatives.

On March 29, 2021, the OSC warned crypto asset trading platforms that offer trading in derivatives or securities in Ontario that they must contact OSC staff or face potential regulatory action. Platforms were given until April 19, 2021 to discuss how to bring their operations as a dealer or marketplace into compliance. Additionally, the OSC stated that platforms that allow access to Ontarians are regarded by the OSC as operating in Ontario for the purposes of securities regulation.

Despite this warning, Poloniex did not contact the OSC.

To date, more than 70 platforms have initiated compliance discussions with Canadian securities regulators. Almost a quarter of these platforms are based outside of Canada. Platforms that have contacted OSC staff appear to represent those that have the largest footprint in Ontario, based on preliminary analysis.

Staff are working with and obtaining more information from the firms that have initiated compliance discussions with the OSC, in order to assess the appropriate path to registration. Firms have been provided with information outlining next steps, including when to file key documents, as well as a staff contact. OSC Staff are available to help resolve any questions firms may have about this process.

To date, there is only one crypto asset dealer registered with Canadian securities regulators. Registration and regulatory oversight provides investors with critical protections.

Staff will continue to take action against non-compliant crypto asset trading platforms and are in contact with international securities regulators to exchange information to support enforcement action.

The OSC thanks the Seychelles Financial Services Authority for their assistance in the Poloniex matter.

The OSC continues to add unregistered crypto asset trading platforms to its Investor Warning List.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk. Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at http://www.osc.ca.

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