Popular crypto exchange Kraken isn’t a fan of Canada’s new proposed laws concerning crypto exchanges, and it is letting the world know. On Wednesday, the exchange sent out a press release, providing its input concerning some of the terms contained in the proposed laws.
Earlier this week, the Canadian Securities Administration (CSA) Investment Industry Regulatory Organization of Canada (IIROC) published a consultation paper that outlined their approach in providing regulatory clarity or cryptocurrency exchanges within the country, while also seeking advice from experts and players within the FinTech industry on how these guidelines can be improved and implemented.
In an official statement published two days later, Andrew J. Kriegler, CEO and resident of the IIROC, said that the regulator had shown a lot of interest in the emerging trend of digital and crypto assets. He pointed out the importance of Canada adopting this technological innovation, adding that it is also expedient to provide sufficient regulatory clarity as to how they could tailored regulatory requirements and implement them to fit the business models of crypto exchanges.
The paper pointed out that as of now, there are over 200 exchange platforms which list over 2,000 crypto assets that can be traded for other assets or fiat currencies. However, none of these platforms is functioning within the oversight of ay government institution.
It also revealed that Canada currently doesn’t recognize cryptocurrency exchanges as being authorized to operate, whether as dealers or marketplaces. However, Kraken is now making its disdain for the proposed regulations known, as it outlined a few details in the paper which could prove problematic.
For instance, Kraken states that the proposed regulations see exchange-to-exchange contracts as securities, pointing out that this is a misnomer. According to the exchange, crypto assets being managed by exchanges belong to investors, and as such, these assets represent the investors’ actual interests.
“The application of a securities law framework, accordingly, is both unnecessary and inappropriate to this structure,” the exchange concludes.
Kraken also pointed out that there was a need for the regulators to relax some of the regulatory policies proposed, arguing that allowing a free market approach would serve exchanges much better than adopting strict policies. It states that while investor and funds security is important, a lot of exchanges are beginning to adopt proof-of-reserve techniques and are self-enhancing their internal controls and security infrastructure. It further points out, “As more Exchanges embrace these features, the competitive expectations for all of the Exchanges increase — for the better.”
Kraken’s latter assessment touches on the issue of security; one of the most significant questions in the crypto industry. While it is true that a lot of exchanges have been working on their internal controls and security, it is also possible that some don’t.
The QuadrigaCX case is a perfect example of the latter; the company’s CEO was the only person who held the access exchange’s cold wallets, where a vast majority of its funds were stored. He died while on vacation, leaving millions of dollars in customers’ funds inaccessible to this day. The argument for a laissez-faire approach to security is attractive, but if we’re looking to avoid a repeat of something like this in the future, that might not be the way to go.