Canadian Regulator Investigates Legality of Binance Serving Clients from Canada

Updated: 31 May 2023

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The Ontario Securities Commission, Canada’s largest securities regulator, is investigating the activities of the cryptocurrency platform Binance in Canada.

Ontario Securities Commission Probes Binance’s Conduct after Canada Withdrawal

Following its withdrawal from Canada, citing disagreements with new regulatory rules, crypto platform Binance is now under investigation by the Ontario Securities Commission (OSC), Canada’s largest securities watchdog. A document published by the Commission confirms the ongoing investigation into Binance’s conduct within the country. This shedds light on the regulatory scrutiny faced by the platform.

On May 30, the OSC filed documents to compel Binance, a cryptocurrency platform, and potentially others to provide documents and data. Binance is trying to halt these efforts by arguing that a previous agreement, known as an undertaking, made in 2022 between Binance and the OSC prohibits the regulator from taking enforcement action based on past behavior.

JUST IN: The ?? Canadian regulator has launched an investigation into #Binance on the legality of servicing clients from Canada by the exchange.

— Coingraph | News (@CoingraphNews) May 31, 2023

Binance encountered conflicts with the OSC in 2021 and 2022 regarding its ability to cater to Canadian clients. The exchange, established by Canadian Changpeng Zhao, is incorporated in the Cayman Islands and conducts business through its registered office in George Town. Binance Canada Capital Markets Inc. and Binance Canada Asset Management Inc. were formed under Canadian laws in December 2021, aiming to serve Canadian residents upon receiving regulatory approval.

Legal Troubles and Regulatory Challenges Faced by Binance in Canada

Binance recently found itself in legal trouble in Canada. The OSC issued an “investigation order” on May 10 to examine Binance’s compliance with Ontario securities law and potential misconduct. Binance’s legal team filed an application, arguing that the order lacked specific breaches beyond what Binance had already admitted to in a previous undertaking.

The following day, the OSC issued a summons to Binance Holdings Ltd., requesting relevant documents and communications about Ontario or Canada as of January 1, 2021. The summons did not require testimony. Binance, however, sought to revoke the investigation order, claiming it violated their settlement agreement with the Commission and constituted an abuse of process.

Furthermore, Binance aimed to cancel the summons, asserting that it sought irrelevant and overly broad information. To Binance this amounted to an improper fishing expedition. Binance’s argument also touched on the “unreasonable search and seizure” issue, citing the protection provided by the Canadian Charter of Rights and Freedoms. Subsequently, on May 12, Binance decided to leave Canada due to the introduction of new regulations following the collapse of FTX Inc.

ASC Rejects Approval for Binance’s Stablecoin (BUSD)

Binance was in the process of registering with the Alberta Securities Commission (ASC), but they were instructed to comply with the new regulations. In April 2023, the ASC informed Binance that its stablecoin (BUSD) would not be approved as a value-referenced asset. The ASC also stated that both BUSD and BNB would be subject to investment limits in certain provinces.

Before the OSC issued the investigation order and summons on May 10 and 11, respectively, Binance had notified the ASC of its withdrawal plans. Binance requested to move the official withdrawal announcement from May 19 to May 12 to maintain confidentiality.